Super Contango Shows Natural Gas Price MoreThan Double By January 2025
CME/NYMEX natural gas is currently showing one of the steepestforward curve moves in recent memory. From the May front month price onFriday, April 5 of $1.79/MMbtu, the price soars to $3.70/MMbtu by January 2025(see figure below) and keeps on moving up to $4.44/MMbtu in January2026. The steep contango has been a fixture of the natural gas marketsince the spot price of gas collapsed in January of this year.
Presumably the optimism implied by the forward curve is dueto cuts in production and expected increases in LNG exports. Lower-48production is off about 5 Bcf/d from last year’s peak with several producerscutting production due to low spot prices, and reduced drilling in dry gasplays (Haynesville rig count off 20% this year). LNG exports will be increasingas the Freeport LNG facility returns to full capacity (May 2024) and newterminals prepare for startup over the next few months. First LNGat Corpus Christi's mid-scale expansion is expected by the end of theyear. Venture Global’s Plaquemines LNG is expected to begin commissioninglater this year and Golden Pass is expected to be online by Q2 2025.
Note in the figure below that even though the front of the curve(1/3/23 orange dashed line, 10/5/23 green dashed line) has droppedsignificantly with the spot price of natural gas (solid blue line), the longend of the curve has been relatively well anchored, with an annual averagearound $4/MMbtu in 2026.
