BofA-Integrateds, Refining, and Midstream US Natural Gas-what happened to 2025 gas price？...-20251013

Peak gas optimism this past spring then downhill..why?

In spring, we were bullish gas for 2025, forecasting that fast ramping LNG volumes and power would lift demand to 114.7bcfd (vs 108.8 in 2024), while constrained Permian egress and Haynesville discipline would cause supply to lag at 112.6bcfd (vs 109.3 in 2024). This would lead to a drawdown of storage and an October storage peak of 3.4tcf,below the 5yr avg of 3.8tcf and a $4+ price. We now expect >3.9tcf in storage at the peak, suggesting S/D balances ~2bcfd worse than originally forecast. This brought down Cal2025 gas price by $1 to ~$3.5/mmbtu today; in this note we investigate the drivers.

Supply the smaller part of problem (+0.5bcfd v forecast)

We had expected supply to grow to 112.6bcfd, with 1.6bcfd from the Permian, 1.5 from Appalachia, and flat from the Haynesville. Supply is now on pace to reach 113.1bcfd,driven by more Permian and Haynesville (pipeline “cap” was slightly higher than expected in Permian; more TILs in Haynesville) and offset by lower Appalachia. Also,Canadian imports were above our forecast (+0.3bcfd) in 1H25 as Canadian operators looked to be “LNG ready” for LNG Canada which started operations in June.