Natural gas price outlook
The North American natural gas market was hit by a tsunami over the past year.
- First of all, the milder temperatures in winter 2019–2020 drove natural gas prices to historically low levels, forcing a majority of gas producers to reduce capital expenditures and thus minimize the impact of the decrease in revenues on their balance sheet.
- Next came a pandemic that led to a sharp slowdown in the global economy spurred by a collapse in demand and prices for petroleum products. In the United States, more than elsewhere, oil production fell sharply, causing a drop in natural gas production.
Demand driven by liquefied natural gas (LNG)
On the demand side, the EIA also revised its forecast for US natural gas consumption upward by 1.4 Bcf/d, due in part to continued growth in demand for liquefaction and export purposes.
In short, a smaller increase in demand relative to supply, combined with high storage levels , accounts for the softening of natural gas prices seen on the markets.
So it appears the gas market has been more resilient to cyclical and structural disruptions than initially estimated by the markets and experts. Of course, the storm has not yet passed.