Natural gas (NG=F) prices are on track to close the year in negative territory. But there is optimism for 2025, largely thanks to exports and increased demand linked to artificial intelligence.
“We are constructive on energy, and because we are constructive on energy, we think natural gas is going to do well,” said Francisco Blanch, head of global commodities and derivatives research. at Bank of America, during a recent roundtable on the energy outlook.
Natural gas prices have fallen 13% since the start of the year, largely due to milder winters and oversupply. But industry observers are betting on increased gas exports and increased energy demand due to the relocation of manufacturing facilities and AI data centers.
“These…centers need to operate 24/7,” said BofA’s Blanch. Energy demand for data centers is expected to grow by 10-15% annually through 2030, which could account for up to 5% of total global energy demand by 2030.
“(Natural gas) will build the infrastructure and power the generation plants to produce electricity,” Dennis Kissler, senior vice president of BOK Financial, told Yahoo Finance. “Natural gas will be the fuel of the future,” he added.
Case in point: energy equipment manufacturer and service company GE Vernova (GEV) recently raised its projections for its gas turbines.
“You think about the United States, and between 40 and 45 percent of our electricity today comes from gas, and we’re about to enter a real load cycle,” Scott Strazik, CEO of GE, said recently Vernova, at Yahoo Finance. “In the rest of the world, that figure is closer to 25%. But as other parts of the world move, like the United States, with things like coal to gas, the proportion of electricity to gas base will only increase.”
The erosion of regulation surrounding the energy sector, expected under the new Trump administration, is also expected to benefit the sector.
For example, the administration should remove restrictions surrounding liquefied natural gas (LNG) export permits and pipeline projects. “Regulations are an added cost,” said Philip Rossetti, a senior fellow at the right-wing R Street Institute. “If you expect less regulation, you probably expect more profitability.”
Oklahoma-based natural gas processing and transportation company, Williams Companies (WMB) and oil and gas midstream operator Oneok (Okay) are both up more than 40% year to date.
Meanwhile, US LNG exports are expected to increase by 15% next year, according to government data, as Europe continues to build storage capacity to reduce its dependence on Russia amid the war in Ukraine.