In This Article:
Natural gas prices were on a rollercoaster ride in 2024, ending with a dramatic 44% annual increase — their best performance since 2021. While natural gas prices have surged due to cold weather and rising liquefied natural gas (“LNG”) demand, the market remains volatile. Geopolitical tensions, shifting weather patterns, and supply-demand imbalances will define 2025. However, for investors, resilient players like Coterra Energy CTRA, Cheniere Energy LNG and Range Resources RRC offer a hedge against this volatility while capturing the potential upside of a recovering market.
Natural Gas in 2024: A Turbulent Ride
Natural gas’ 2024 spike was largely driven by an exceptionally cold December in the United States and Europe, which pushed up demand for heating. Front-month natural gas futures hit a 52-week high of $4.20/MMBtu by late December, marking a nearly 50% gain for the year. Meanwhile, production grew steadily, averaging 103.3 billion cubic feet per day (Bcf/d) in December, though slightly below the record 105.3 Bcf/d set in 2023.
Geopolitical tensions added to the drama. Europe’s reliance on U.S. liquefied natural gas (‘LNG’) deepened as the Ukraine-Russia gas transit agreement expired. With European inventories depleting faster than average, reliance on U.S. exports solidified America’s position as the world’s largest LNG exporter. Two new LNG facilities — Venture Global’s Plaquemines plant and Cheniere Energy’s Corpus Christi Stage 3 — further expanded export capacity.
2025 Outlook: Supply and Demand Dynamics
The natural gas market is set to remain volatile in 2025, balancing production growth with unpredictable demand and geopolitical risks. The Energy Information Administration (“EIA”) forecasts U.S. production to rise modestly to 105 Bcf/d, driven by LNG export demand, which is expected to climb to 17.8 Bcf/d from 15.2 Bcf/d in 2024.
Weather remains the wild card. Current forecasts of a colder January have pushed up short-term prices, but a shift in temperature trends could quickly reverse this trajectory. The U.S. winter season and Europe’s efforts to replenish depleted storage will likely dominate early 2025 pricing trends.
China and Europe also play critical roles. China's demand for natural gas is expected to grow as the country increases LNG imports. In Europe, however, storage concerns and a potential resumption of Russian gas supplies could temper bullish sentiments.
The LNG Factor
LNG continues to reshape the natural gas market. U.S. export capabilities have expanded significantly, with the commissioning of new facilities like Plaquemines and Corpus Christi. By late 2025, additional capacity from the Golden Pass LNG terminal, a joint venture between QatarEnergy and ExxonMobil, could further bolster exports.
This LNG growth benefits producers and infrastructure players alike. Companies like Cheniere Energy capitalize directly on rising export volumes, while upstream firms like Coterra Energy and Range Resources gain from robust domestic demand for feedstock. LNG exports now serve as a vital pressure valve, absorbing excess supply and stabilizing domestic prices.