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Mild winter pushes US gas prices down

Wall Street analysts view the outlook for US natural gas as mixed. A sharp near‑term price decline contrasts with expectations of much stronger long‑run demand driven by liquefied natural gas (LNG) exports and rising global power needs, Morgan Stanley said in a new report.

Henry Hub benchmark futures have fallen about 28% year-to-date, the bank found. The retreat followed an unusually mild end to the heating season, which left inventories roughly 5% above the five‑year average.

In the short term, analysts expect prices to trade in a narrow range or decline modestly as seasonal spring demand typically weakens. However, Morgan Stanley emphasized that structural demand factors are strengthening. The bank identified LNG exports as a key growth driver, with gas demand already on an upward trajectory and projected to rise materially.

The present softness in the gas market stands in stark contrast to broader energy sector dynamics, which have been buffeted by severe supply disruptions since the outbreak of hostilities in Iran in late February. Lately, the consumer price index data showed a large inflationary impulse from energy. Thus, the energy subindex rose 10.9% on a monthly basis, the largest monthly increase since September 2005. The gasoline index jumped 21.2% month-on-month, and the national average retail price of a gallon of gasoline topped $4 for the first time in more than three years.

Despite the current surplus, the long‑term gas outlook remains firm. Morgan Stanley projects US total gas demand will reach about 140 billion cubic feet per day (Bcf/d) by 2030, up from roughly 113 Bcf/d at present.

Power generation will provide additional support to domestic gas consumption. Hydroelectric output fell sharply after western US snowpack stood at about 65% below climatological norms. That shortfall is expected to raise gas burn for power generation. Morgan Stanley forecasts that summer demand from power generators will rise by about 1 Bcf/d year-on-year, supported by a return to more typical weather patterns and structural growth in electricity needs.

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