As the summer months approach, the U.S. natural gas market is showing signs of tightening, with futures edging higher amid expectations of increased demand and constrained supply. This shift presents potential opportunities for investors looking to capitalise on the evolving energy landscape.
Recent data indicates a notable uptick in natural gas prices, driven by a combination of factors. Production levels have dipped to a two-month low of 102.0 Bcf/d in early May, down from April’s record of 105.8 Bcf/d, due to seasonal maintenance and drilling slowdowns. This reduction in output has created immediate supply tightness, despite robust storage injections.
Simultaneously, demand is on the rise. The U.S. Energy Information Administration (EIA) forecasts a 4% increase in natural gas demand in 2025 compared to 2024, led by an 18% surge in exports, particularly liquefied natural gas (LNG). New LNG export facilities, such as Plaquemines LNG Phase 1 and Corpus Christi LNG Stage 3, have commenced operations, contributing to higher export volumes.
Weather patterns are also influencing the market. Warmer-than-normal temperatures are expected to boost cooling-related demand, further tightening the supply-demand balance. Analysts project that this increased demand, coupled with the current supply constraints, could support higher prices through the summer months.
For investors, these dynamics suggest a market ripe with potential. Companies involved in natural gas production and export, such as EOG Resources, have reported stronger-than-expected profits, benefiting from higher natural gas prices and increased production. EOG Resources, for instance, reported a 63.4% year-over-year rise in natural gas prices and a 4.8% increase in total production.
The U.S. natural gas market is experiencing a tightening supply-demand balance as summer approaches, driven by production slowdowns, increased exports, and rising domestic demand. These factors are contributing to higher natural gas prices, presenting potential opportunities for investors in the energy sector.
Diversified Energy Company plc (LON:DEC) is an independent energy company engaged in the production, marketing, transportation and retirement of primarily natural gas and natural gas liquids related to its U.S. onshore upstream and midstream assets.
