Natural gas prices are expected to undergo a notable transformation in 2025, according to analysts at BofA Securities.
The natural gas market is projected to experience tightening supply and rising prices, driven by factors such as increasing demand for liquefied natural gas (LNG) exports and slower production growth in key regions like the Haynesville Basin. This reflects a broader structural shift toward greater natural gas consumption in both domestic and international markets.
BofA forecasts NYMEX natural gas prices to reach a baseline of $4.00 per MMBtu in 2025, an upward revision from earlier projections. This increase is attributed to expected supply-demand imbalances, particularly in the second half of the year.
New LNG export projects, including Plaquemines LNG and Corpus Christi Stage 3, are anticipated to drive additional demand, potentially exceeding the capacity of U.S. producers to meet the required supply. Together, these facilities are projected to add 3.5 billion cubic feet per day of incremental demand.
The report also highlights challenges in production growth, particularly in the Haynesville Basin, where structural hurdles such as declining rig counts and limited infrastructure development persist. Production in the basin has been steadily declining, with minimal ability to scale up to meet rising demand.
Producer consolidation in the Haynesville Basin has improved operational efficiency but also reinforced production discipline, making oversupply unlikely. Meanwhile, LNG demand and domestic electrification are positioned as long-term drivers of natural gas consumption, solidifying its role in energy transition strategies.
BofA analysts point to global LNG arbitrage opportunities as a further catalyst for higher U.S. natural gas prices, as international markets continue to pay a premium over domestic benchmarks.
In contrast, oil markets face a less favorable outlook for 2025, with BofA projecting an oversupply scenario that could suppress oil prices. This dynamic is expected to enhance the attractiveness of gas-focused exploration and production companies compared to their oil-focused counterparts.
BofA also sees potential for a re-rating of gas-focused equities, given that current valuations do not fully reflect long-term fundamentals.
In Canada, the upcoming Shell-operated Canada LNG export facility is expected to provide economic benefits for Western Canadian natural gas producers. Although the facility’s ramp-up will take time, it is projected to gradually tighten the AECO basis, benefiting producers such as Ovintiv (NYSE: OVV), which BofA has upgraded to a “Buy” based on this outlook.
