Natural Gas – It Isn’t Over

In this week’s RBC’s Markets in Motion podcast, Chris Louney, Commodity Strategist, guest hosts to discuss his latest views on the natural gas markets.

Today in our 6:15 minute podcast, we discuss the factors impacting US natural gas prices this year and beyond. Natural gas prices generally are attracting far more attention amid headlines of energy prices broadly, inflation worries and economic concerns, and even energy crises that have in many ways held outsized interest in the market. While global gas prices remain on another level, US gas prices also reached very high levels earlier this year, and even after some recent developments, they still remain quite elevated.

We cover three main themes in this episode. First, geopolitical premiums are now present in US natural gas markets in a way they were not before. We draw on both an analysis we did earlier this summer as well as some learnings after an explosion that shut down a major US facility early last month. This leads us to our second point - our view for the remainder of this year. We think gas prices should average north of $6/MMBtu in the US, a view that previously was our high scenario, and now looks like the more probable one for the remainder of the year. Third, in all of our scenarios US gas prices fall next year. While we are by no means returning to the lower-for-longer price environment many had gotten used to, we do expect lower gas prices in 2023 as production comes online and there is less structural growth on the other side of the balance y/y, albeit with the caveat that geopolitics are here to stay for US natural gas.