The Coal Trader

Slower arrival of new LNG capacity has US gas market longing for 2025

A few weeks into the new year, gas market participants are already anticipating the next turn of the calendar as they see limited upside for prices until new liquefaction capacity enters the picture in force beginning in 2025.

Despite a temporary boost to prices to begin January, gas traders appear unenthused about what the year holds as above-normal weather forecasts for February compound with other factors, such as the later in-service target of Golden Pass LNG’s 18.1 million mt/year facility, to drag down the 2024 gas curve.

In the forwards market, the summer 2024 strip was $2.45/MMBtu as of Jan. 22, and after spending most of 2023 solidly above $4/MMBtu, December 2024 Henry Hub forwards settlements have averaged $3.69 year to date, according to data from S&P Global Commodity Insights.

In 2025, prices are higher with the summer strip at $3.24, although only December 2025 priced above $4/MMBtu as of Jan. 22.

“The bullish case for US natural gas pricing [in 2024] was based on LNG exports,” Nitin Kumar, a senior analyst with Mizuho Securities, said in an interview. “In 2024, about 4 to 5 Bcf a day of capacity was supposed to come on.”

“Instead of seeing 4 or 5 Bcf a day of increased demand, you’re now expecting — let’s call it 1 Bcf a day,” Kumar said, adding a qualification that the timing of new incremental feedgas demand remains fluid.

LNG in 2024-25

Outside of recent weather-related disruptions, LNG feedgas demand has been at all-time highs in recent weeks, averaging nearly 14.8 Bcf/d during the first week of January and exceeding 15 Bcf on a handful of days since mid-December, S&P Global data showed.

However, feedgas demand has little room to grow further until exporters add new capacity, a larger share of which is expected arrive in 2025 than in 2024.

In 2024, most of the North American capacity additions are not expected to materialize until the final months of the year before a wave of new supply arrives in 2025. Around 8.4 million mt/year of new capacity could be added by the end of 2024 on top of the 84 million mt/year of liquefaction capacity in operation currently, according to S&P Global Commodity Insights analysts.

Sentiment that has ‘clearly soured’

Sentiment about the gas market outlook in 2024 has “clearly soured” in light of pricing and LNG timing, Dan Pickering of Pickering Energy Partners said in a market commentary Jan. 19. “For most of 2023, US gas producers have seen 2024 as a ‘bridge year’ toward robust gas markets in 2025+,” Pickering said, but that assessment “took a kick in the teeth” from relatively warm winter weather and the Golden Pass delay.

By early 2025, LNG capacity additions could rise to around 18 million mt/year beyond current levels, with the expansion expected to reach more than 53 million mt/year over the course of that year, according to S&P Global.

“We do see 2025 as being an exceptionally strong year,” Kumar said, although he stressed that international demand for US LNG could be expected to fluctuate thereafter and to trigger price volatility.

“My view is that you’ll see that international demand grow, but it will happen in waves, and as supply also comes on in waves, you’ll see periods where you’ll have oversupply and you’ll see periods that are undersupplied.”