Looking ahead to the medium and long-term, observers expect the natural gas price to stay low throughout the decade. Whereas gas was sold for an average of over $6 per MMBtu between 2000 and 2008, which was prior to the shale oil boom, prices for futures contracts until 2030 have failed to rise above $2.80 per MMBtu, according to Forbes.
Even so, some industry representatives are hoping that a limited rebound over the coming year or 18 months from the current extremely low gas prices could help fuel a recovery in the energy sector.
“Analysts and energy executives are increasingly looking to natural gas markets as a first source of relief for U.S. producers,” wrote Dan Eberhart, chief executive of Canary, LLC, a major oil and gas services company.
“Enervus expects prices to exceed $4 per MMBtu and may even reach $4.50 as early as the coming winter. Such an increase would incentivize new drilling and production growth from shale gas plays like the Marcellus, Utica and Haynesville basins. This raises the potential for the recovery in gas to lead to a broader one in the post-coronavirus energy sector,” Eberhart continued.
John Freeman, who leads an analyst research team at Raymond James, estimates that natural gas prices will reach $3.50 per MMBtu by 2021 and could even surpass $4 per MMBtu later that year, which is above the current futures price.
“It’s been more than a decade since we’ve been able to make that statement,” Freeman said. “While the 2020 gas market is well supplied due to the late 2019 production ‘surge,’ we’re expecting 2021 supply to hit a two-year low.”
In Texas, however, natural gas could come under increased pressure due to the rapid expansion of renewables on the electricity grid, which could hold prices low as demand is reduced.
Although the Energy Information Administration forecast in March that natural gas will remain the primary power plant fuel across the U.S. during 2020 and 2021, it warned that demand could fall from a record high of 87.2 billion cubic feet per day (bcfd) in 2020 to 85.6 bcfd in 2021. The main reason it cited for this was the growth in renewable energy production.
Jordan Smith is a freelance journalist and translator covering issues related to energy, the environment, and politics. His work has appeared on the independent news site Opposing Views, and at the Canadian Labour Institute.