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Natural gas price forecast 2030-2050: What next for gas prices?
Despite Russian gas supply restrictions, Europe avoided major gas shortages during the past winter. Milder weather – apart a cold snap in December – energy-saving campaigns, and robust liquefied natural gas (LNG) imports kept the region’s reserves from depleting. February 2023 saw European natural gas prices fall to an 18-month low.
However, European gas prices saw a surge in March amid ongoing protests in France leading to supply concerns and forecasts of low temperatures.
Do you want to find out how the energy prices in Europe will change for the long term? Read this article for the recent natural gas news, analysts’ view and a long-term natural gas price forecast.
What is natural gas?
Natural gas is a fossil energy formed from plant and animal remains buried deep beneath the earth’s surface and ocean floors. The remains accumulated into thick layers of carbon and hydrogen-rich material over hundreds of millions of years. Due to pressure and heat, the material transformed into coal, oil and natural gas.
Natural gas can also be found in coal deposits called coal-bed methane.
There are two ways of transporting natural gas from the gas field to the final destination: through a pipeline and LNG.
LNG is natural gas cooled to below -160ºC to change it into liquid for easy transportation. Once the LNG arrives at the destination, it is transformed back into gas in a regasification facility before distribution via pipelines.
According to World Atlas, the 10 biggest natural gas producers are the US, Russia, Iran, China, Qatar, Canada, Australia, Saudi Arabia, Norway and Algeria. Top importers include China, Japan, South Korea and India.
Natural gas is used for electricity generation, a variety of industrial applications, heating and the production of fertiliser.
Natural gas historical performance
Natural gas prices soared from the second half of 2020 to the third quarter of 2022, owing to rising post-Covid-19 demand and concerns about Russia’s supply after it invaded Ukraine in February 2022.
In the fourth quarter of 2021, uncertainties regarding Russia’s supply bolstered the price rally, according to Cedigaz. Europe’s natural gas price reached its highest price for 2021 at €187/MWh on 21 December, before retreating to €70 on the last day of 2021.
Dutch Title Transfer Facility (TTF), the European gas price benchmark futures, rose almost 268% in 2021, while JKM rose 113%. US natural gas prices increased by almost 47% in 2021.
On 7 March 2022, Dutch TTF briefly reached an all-time intraday high of €345/MWh as Russia’s invasion of Ukraine on 24 February heightened uncertainty on the Russian gas supply. Russia is the world’s second-largest natural gas exporter. Europe relied on 45% of its gas imports from Russia at that time
In the second quarter, prices fell below €90/MWh despite Russia beginning to cut supplies to several European countries in retaliation for sanctions imposed by Western nations over its invasion of Ukraine. Falling crude oil prices from multi-year highs of $139 per barrel, soft LNG demand in Asia and milder temperatures in Europe offset lower Russian gas supply.
The price rebounded in mid-June and advanced until it hit a new high of €346.52 on 26 August after Gazprom said it would shut gas flow to Europe for three days for routine maintenance to its Nord Stream 1 pipeline.
However, Dutch TTF retreated to below €200/MWh by September despite Gazprom not having resumed gas deliveries after maintenance was completed on 2 September.
The elevated Dutch TTF price was due to the risk of supply shortage in winter being alleviated after Germany met its October target of filling its gas storage capacity up to 85% earlier than anticipated. As of 4 January 2023, Germany’s gas storage level stood at 90.64%, according to official data.
Since Russia’s invasion, Europe has increased LNG imports, struck new LNG import deals, pushed ahead with the construction of new LNG receiving terminals, and encouraged gas savings to cut reliance on Russian gas.
European natural gas price for February delivery stood at €65/MWh, the lowest since December 2021 before the war in Ukraine, according to ICE data.
US natural gas price began 2023 at $4.38, having fallen from a 14-year high of $9.85 per metric million British thermal units (MMBtu) on 29 August. Meanwhile, JKM opened at $29.345/MMBtu in January, dropping from $69.95/MMBtu on 25 August.
As of 28 March, both had fallen further with Henry Hub at $1.9 and JKM at $12.05.
The growth story for LNG
LNG will increasingly play role in meeting gas demand as Europe has been adamant to phase out natural gas imports from Russia.
Wood Mackenzie forecast Europe’s LNG demand to grow by 25% by 2028, after jumping 60% in 2022.
“After that though, in our latest view, demand declines quite steeply through the 2030s as the EU accelerates its push to low-carbon energy,” said Kateryna Filippenko, Wood Mackenzie’s Global Gas Research said on 2 December.
Globally, the firm expected LNG demand to grow by 200 million tonnes per annum (mmtpa) or 50%, over the next 10 years with Asia accounting for two-thirds of the demand. Much of the demand in Asia would come from China and India, while LNG imports to mature Asian gas markets such as Japan and South Korea are expected to fall as their energy mix shifts toward renewables and nuclear.
The firm forecasts the global supply of super-chilled fuel to increase by 45% by 2030. In the past two years, new projects that will deliver 78 mmtpa of supply have been sanctioned and another 90 mmtpa is expected from 2023 to 2025, which will lower gas prices from current high levels.
“With Europe increasingly dependent on imported LNG in gas and power markets, price volatility is here to stay. Europe will continue to compete with Asia for LNG supply at times of high demand,” she added.
Natural gas predictions: 2022-2030 price targets
In the medium term, will natural gas prices continue to ease?
Bank of America (BofA) Global Research on 3 January forecast the US Henry Hub gas price to steadily decline to $4.50/MMBtu by December 2023 from $6.50 in December 2022.
The Henry Hub gas price was expected to edge down to an average of $6.5/MMBtu in 2023 from an average of $7.0/MMBtu in 2022, according to Fitch Solutions’ forecast on 8 December 2022. The US natural gas price was predicted to drop to $5.75 in 2023. It forecast the UK’s natural gas price National Balancing Point (NBP) to average $34.8/MMBtu in 2023, dropping from $39.0/MMBtu in 2022.
“The energy crisis response has seen a tremendous effort to build in diversification in energy with a mild start to winter all conspiring to greatly improve the fundamental outlook for 2023,” Fitch Solutions’ analysts wrote.
The EIA in its short-term energy outlook on 7 March forecast that Henry Hub could average $3.02/MMBtu in 2023, dropping almost 50% from $6.48 in 2022, and $3.89 in 2024.
Meanwhile, multinational lender ABN-AMRO’s 27 March forecast for the Dutch TTF saw natural gas prices at $55/MMBtu in 2023 and dropping further to $50 in 2024.
Trading Economics’ Europe natural gas forecast saw the fuel trading at €57.39/MWh by the end of the first quarter of 2023, rising to €73.44 in 12 months, as of 28 March 2023.
ANZ Research forecast the LNG spot price to drop to an average of $32/MMBtu in 2023 and $23.5/MMBtu in 2024, compared with an estimated $36.8/MMBtu in 2022.
The World Bank in October 2022 forecast US natural gas prices could average $6.20/MMBtu in 2023 and $6 in 2024, down from $6.60 in 2022 on weaker demand as households and industries curbed consumption and switch to substitutes. It expected European gas prices to trade at $32 in 2023 and $28 in 2024, dropping from $40 in 2022. As for LNG, the bank predicted it would average $17/MMBtu in 2023 and $15.90 in 2024, falling from $18.40 in 2022.
Due to price volatility in the energy market, no analyst provided long-term natural gas price projections beyond 2024.
Natural gas forecast for 2030-2050
While analysts typically did not provide a long-term outlook for natural gas prices, algorithm-based price prediction services can offer such forecasts by assessing historical data. Let’s take a look at what the future price of natural gas could be.
Algorithm-based forecasting service Wallet Investor was bullish on its natural gas price forecast for 2023, considering it an “awesome long-term (one-year) investment”.
The service expected the natural gas price to trade at $3.380/MMBtu in December 2023 and rise to $6.014/MMBtu in December 2025. In its natural gas price forecast for 2028, Wallet Investor’s system projected the price would climb to $8.704 by March of that year.
Fitch Rating’s long-term natural gas price forecast on 13 March expected Henry Hub to average $2.75 per 1,000 cubic feet (Mcf) and Dutch TTF to average $5.0/Mcf in 2026 and beyond, dropping from $3/MMBtu and $10/MMBtu in 2025 respectively. The firm did give any predictions for how much gas would cost in 2030.
Deloitte’s natural gas price forecast for 2030 in December 2022 saw Henry Hub trading at $5.40/Mcf, down from $8.50/Mcf in 2022. The firm’s natural gas price forecast for 2040 expected the US gas price to rise to $6.35/Mcf.
In 2041, Henry Hub was expected to trade at $6.50/MMBtu. It did not give a natural gas price forecast for 2050, but Deloitte projected Henry Hub’s prices to increase by 2% per year after 2041.
Most analysts are highly cautious about providing long-term natural gas price forecasts due to the volatility of the energy market.
When looking for future gas price predictions and attempting to assess the long-term outlook for natural gas prices, bear in mind that analysts’ forecasts can be wrong. Analysts’ projections are based on making fundamental and technical studies of the asset’s performance, but past performance never guarantees future results.
Always do your own research and remember that your decision to trade depends on your attitude to risk, your expertise in this market, the spread of your investment portfolio and how comfortable you feel about losing money. Never invest more money than you can afford to lose.