Goldman Sachs analysts told clients in a note this week that the company sees limited price growth potential in Henry Hub through 2025. The firm expects production to recover in June, but to stabilize at a lower level than previously expected. This prompted Goldman to revise its BalSum24 Henry Hub forecast upward to $2.65/mmBtu (from $2.15/mmBtu) and to $2.88 mmBtu.
The revised forecast came even as production continued to decline, remaining below 99 billion cubic feet per day for the past several weeks. Goldman revised down its production forecast by 0.5 billion cubic feet per day to 100.6 billion cubic feet per day through the end of the summer.
Despite the revised gas price forecast, Goldman believes upside potential is limited. “In our view, sustained price increases will result in (1) reduced gas flaring as a result of the switch from coal to gas and (2) an end to production shutdowns, preventing a physical tightening of the market and keeping storage facilities operational. elevated route, which could once again increase the risk of congestion,” analysts write in a note.
Prices are expected to rise significantly only after the start of winter as a result of increased demand for feed gas from new LNG projects. “This view is supported by the additional demand support we are now seeing following changes to our gas combustion model to accommodate higher energy loads from data center growth and electrification,” the analysts said.
Accordingly, Goldman remains bullish on Henry Hub’s Sum25 at $4/mBtu versus forward prices of $3.37/mBtu. They recommend opening a long position on June 25 at Henry Hub.