It may be a contrarian position to be bullish on natural gas, but the list of analysts that believe natural gas will likely increase in price is getting longer.
The massive amount of gas being produced and discovered by shale gas plays throughout North America has certainly put downward pressure on natural gas prices. Only a a couple years ago there was discussion about “peak natural gas” production and how dwindling supplies would require the import of liquid natural gas (“LNG”) from overseas suppliers. However, the supply being tapped due to advancements in horizontal drilling and fracture treatment is enough to supply all of North America’s needs for many decades without any imports.
Back in March, a Bloomberg survey of 22 analysts indicated that 19 of 22 believed natural gas would appreciate to $7.00. Since that time, natural gas has appreciated to ~$4.00.
There are two major factors in determining the short and long term price of natural gas. First, is the seasonal price pressures. We do not know what the summer consumption of natural gas will be. If there is a hotter summer due to weather extremes encouraged from climate change or hurricane disruptions, we could see an immediate increase in consumption and increase in prices.
In the long term there it is obvious that natural gas will play a major roll in reducing CO2 emissions. With a lower carbon footprint compared to other fossil based fuels, and abundant supply, natural gas is the most practical energy source for immediately impacting CO2 emission by using more natural gas for transportaion and power generation.
Regardless, it seems apparent that once the economy turns positive demand for natural gas will increase. And once current programs are implemented into reducing CO2 emissions, uses for natural gas as an energy source will expand. Both will increase demand from current levels.