We are on the verge of a Natural Gas "Supercycle"

[dan_s]

I am probably going to add Comstock Resources (CRK), a pure play on natural gas, back to the Sweet 16 to replace Veren (VRN), which recently merged into Whitecap.
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Investing.com -- Bernstein analysts are forecasting the onset of a U.S. natural gas supercycle, driven by a combination of robust demand growth and constrained supply. In a detailed sector outlook, Bernstein projects that total U.S. gas demand will rise from approximately 120 billion cubic feet per day (bcfd) in 2024 to about 148 bcfd by 2030. < This is why EIA recently increased their 2026 natural gas price forecast to $4.80/MMBtu.

The key drivers of this growth are an expected surge in liquefied natural gas (LNG) exports and a sharp increase in power demand, particularly from data centers.

According to the Bernstein report, LNG exports are forecast to grow by 10 bcfd through the end of the decade, based on projects that are already sanctioned or under construction. < With Team Trump fast tracking approvals, LNG exports could increase by 20 Bcf per day by 2030.

The analysts see this export-driven demand as “highly certain,” emphasizing that international markets will account for the vast majority, around 80%, of the demand growth over this period.

Power demand is expected to add another 8 bcfd, continuing a linear trend observed over the past two years.

This increase is attributed primarily to data center expansion, which the report characterizes as a structurally new source of demand.

Despite ongoing coal plant retirements, Bernstein assumes that renewables will largely offset the lost generation capacity, but acknowledges that natural gas could fill some of the gap depending on renewable deployment rates.

While demand is projected to climb steadily, supply growth appears more constrained.

Bernstein highlights that over 70% of U.S. gas supply does not interact with price due to either being associated with oil drilling or limited by infrastructure constraints.

In particular, production from Appalachia, the nation’s largest gas-producing region, is expected to remain flat due to pipeline limitations.

This leaves the Haynesville and Midcontinent regions as the primary sources of flexible, price-responsive supply. < Comstock Resources (CRK) is a pure play on the Haynesville, which is why I believe it deserves premium pricing.

Bernstein models suggest that to balance the market, these basins will need to contribute an additional 17 Bcfpd by 2030.

However, current activity levels, particularly in the Haynesville, are below the necessary pace, raising concerns about the industry’s ability to respond. < CRK will be ramping up well completions in 2H 2025.

The supply-demand mismatch leads Bernstein to forecast a sustained rise in gas prices.

Their model indicates a long-term equilibrium price around $5 per million cubic feet (mcf), above recent spot and forward prices.

Under more bullish assumptions, such as a shortfall in Haynesville growth, prices could exceed $8 or even $10/mcf, triggering both demand destruction and increased incentive for supply expansion.

Bernstein’s assessment calls this environment a “supercycle,” driven not by speculative hype but by underlying structural trends.

They stress that global dynamics, including rising LNG demand for power and transport in Asia, will ensure that U.S. exports continue to run at or near capacity, further tightening the domestic market.

In this context, Bernstein recommends increased exposure to gas-weighted equities, naming EQT (ST:EQTAB) as their top investment idea to capture long-term value from this structural shift. < I like AR, CTRA, RRC, CRGY and OVV for more exposure to rising natural gas prices.

[ChuckGeb]

Likewise EOG is set up well with its South Texas Dorado gas play and Black Stone Minerals with its royalty concentration in Shelby Trough. Both companies in my opinion are “on sale”.

[mrtangible]

Hi Dan, I have a question about AR:

I like AR for its unhedged position. Could you kindly:

(1) share the natural gas price assumptions embedded in your AR forecast
(2) make any comment you care to about potential additional upside under a stronger natural gas price outcome

Thanks for keeping us posted on the "Supercycle"!

[dan_s]

The natural gas prices used in all of my forecast models are based on Henry Hub natural gas prices averaging the following:
2025
Q1: $3.65 < Actual average for HH in the quarter
Q2: $3.25 < So, far the average price has been around $3.40 more than half the way through the quarter.
Q3: $4.00 < If there is a "Bidding War" for supply in the NYMEX futures market, it will be in Q3.
Q4: $4.50
For the year 2026 I am using $4.50, which compares to EIA's current forecast of $4.80 for 2026.

Antero Resources (AR) actual realized natural gas prices in Q1 2025 was $3.95/mcf because they sell most of their gas into regions that pay a premium for gas. South Louisiana has the highest premium. Antero also sells a lot of high Btu gas, which also gets premium prices.

If you download the AR forecast model from the EPG website, you can see at the bottom what I expect their actuals realized prices to be each forecast period. This is shown on all the forecasts for companies in our three model portfolios.