The US Gas Comeback Is Real

New Yorkers bowing their heads into a cutting wind is typically a bullish sign for natural gas prices, and this January is no exception. The rally extends beyond immediate conditions, though, with average futures for the next 12 months close to breaking above $4 per million British Thermal Units for the first time since January 2023, when they were coming down from the prior year’s Ukraine war-related spike. Beyond the cold weather, there is a shift in the overall climate for gas, centered on a revival in US electricity demand.

gas rallies

For more than a decade, natural gas has delighted customers but mostly disappointed investors. Shale made gas competitive with coal and nuclear — but mostly via excessive supply putting gas into a structural bear market. Meanwhile, as demands to combat climate change accelerated from emissions reduction to net zero, the natural limitations of gas — which still emits carbon when burned, albeit less than coal — muddied the prior narrative of it being a “bridge” fuel. Demand for gas-fired power increased as coal declined, but flat electricity demand overall and rising renewables penetration capped those gains, such that exports of liquefied natural gas have been crucial in soaking up supply.