US NatGas Deemed “Oversold” By Goldman Ahead Of Summer

Samantha Dart, Goldman’s co-head of Global Commodities Research, told clients on Tuesday that U.S. natural gas prices appear oversold and reaffirmed a bullish price forecast for the summer period, citing tightening market fundamentals. 

“Upside to Sum25 Henry Hub from here. On net, we continue to see U.S. gas prices as oversold. With net long positions by managed money now more normalized and fundamentals tightening into peak summer as discussed above, we maintain our Bal Sum25 Henry Hub forecast of $3.90/mmBtu,” Dart said. 

Dart noted that NatGas production may remain elevated into the early summer months, longer than she previously anticipated, though she expects a decline to begin in June. She explained that the recent surge in output is primarily due to previously drilled but uncompleted wells (DUCs) and delayed turn-in-line wells (DTILs) now coming online, describing this as a temporary phenomenon: 

The elevated U.S. natural gas production we flagged recently might last longer into this summer than we expect, but production will ultimately move lower. To be sure, we still expect lower Appalachia production sequentially, as a weather-driven decline in Northeast heating demand pressures local wellhead prices lower1 . However, production levels might ultimately remain above our expectations into early summer. To be clear, EQT commented last week during its earnings call that this surge in production has been largely due to wells that had been previously inventoried – as drilled but uncompleted (DUCs) or delayed turn-in-lines (DTILs) – but are now producing, which we think is consistent with a strong price incentive from 1Q25 Henry Hub having averaged in the high $3s/mmBtu, with local Appalachia prices not far behind. This suggests a one-off boost to local production, with heavy declines rates for the new wells likely setting in from June.

In the Northeast, particularly in Appalachia, Dart said production will likely slide as weak local prices, driven mainly through reduced heating demand, put pressure on wellhead economics. She pointed out that U.S. power burns have recovered faster than modeled, with increased coal-to-gas switching:

C2G starting to respond. At the same time, power burns have started to recover vs our modeled expectations, suggesting that utilities are likely increasing C2G switching following the drop in gas prices. The gas share of U.S. thermal generation has started to rise and is now at the highest level year to date at 70%.

She pointed out that NatGas-fired generation now accounts for 70% of U.S. thermal generation, the highest level so far this year.