Investing.com – The market is currently facing a number of complex challenges that are shaping its outlook for the near future.
“However, the outlook is not without significant caveats. Investment in the sector is extremely weak, reflecting the overall reduction in capital spending,” Alessandro Valentino, product manager at VanEck, told Investing.com.
Valentino noted that the rise in natural gas prices in the second quarter of 2024 was largely due to increased cooling demand in Asia, exacerbated by extreme summer temperatures.
In addition, ongoing supply constraints, particularly from Russia, continue to keep prices high. Despite these factors, however, the sector’s outlook remains clouded by several major obstacles.
One of the biggest concerns is the lack of investment in the natural gas sector. Lower investment is hampering the development of new projects, while ongoing supply chain disruptions and increased geopolitical risks such as the conflicts in Ukraine and tensions in the Middle East are further complicating the sector’s ability to efficiently meet growing demand.
Recent data from the U.S. Energy Information Administration (EIA) indicate a moderate supply surplus. Working gas volumes in storage as of August 8, 2024, totaled 3,332 billion cubic feet (Bcf), slightly above the five-year average. Meanwhile, China’s natural gas imports recorded robust growth. In June, natural gas production rose 9.6% year-on-year.
“The combination of increased demand due to slower-than-expected global economic growth and modest supply surpluses reflected in recent data does not suggest that we will see huge price increases in the near term,” Valentino said. The natural gas market remains highly complex and there are several forces at work that could influence its direction in the coming months.
Piper Sandler lowers forecasts for natural gas and oil prices
Piper Sandler has revised its outlook for the energy market and lowered its price forecasts for natural gas and oil.
The brokerage firm lowered its forecast for natural gas deliveries at Henry Hub in 2025 from $4.00 to $3.25 per MMBtu, citing slower growth in LNG exports and more efficient production.
A current surplus of over 450 Bcf in natural gas storage and new infrastructure, particularly in the Permian Basin, also influence the downward revision.
For oil, Piper Sandler adjusted its forecasts for 2025. The price of West Texas Intermediate (WTI) per barrel is now expected to average between $71 (previously $81) and $75 (previously $85).
The revisions reflect expectations of lower global demand and a possible recession in the US, despite OPEC’s efforts to stabilize the market.
The energy outlook remains uncertain and there are several factors at play that could further influence prices.
