Investing.com – A research note from Wells Fargo (NYSE:) showed clear prospects for natural gas demand growth on Wednesday, despite potential headwinds from robust and sustained supply growth.
Analysts suggest a slowdown in the Permian Basin could act as a catalyst for a more bullish long-term gas price outlook. They opted for a more positive outlook on the US gas E&P sector in December 2023 and continue to recommend Antero Resources Corp (NYSE:) and Coterra Energy Inc (NYSE:) with an overweight rating.
This positive view is based on the expectation that lower gas-related capital expenditures and lower activity levels will restore the balance between supply and demand, coupled with the multi-year expansion of LNG exports.
However, the analysts have also adjusted their price forecast and extended it to 2030 to reflect improving fundamentals and the impact of AI/data center-driven demand. They see the US gas market shifting from persistent oversupply in 2023/2024 to undersupply from 2025 to 2027.
Despite the steady increase in U.S. supply and demand for natural gas since the advent of the U.S. shale gas era, analysts note that LNG exports overwhelmingly represent the largest component of expected future demand growth.
On the supply side, the Marcellus and Haynesville shale gas fields, along with associated Permian gas, represent the fastest growing sources of supply.
However, Wells Fargo analysts warn of potential risks. These include the possibility of a recession impacting energy consumption and commodity prices, regulatory restrictions on natural gas use, potential methane taxes and emissions, weather-related disruptions, and the impact of tropical storms on the Gulf Coast, especially given the significant expansion of the LNG export industry along the Texas and Louisiana coasts.
