Keith Kohl's 3rd Prediction for 2025
Posted: Tue Dec 31, 2024 2:04 pm
#3: Cold Winter Nights Will Wake-Up Natural Gas Bulls
Natural gas truly was an underdog investment in 2024.
Between the mild winters we’ve seen over the last few years and the huge supply glut that has persisted for more than a decade, many natural gas bulls have been hiding their eyes praying for prices to turn around.
And despite a brief surge in 2022 from the Russian-Ukraine war, prices have been in the basement.
But things have already started to turn around, with natural gas prices at the Henry Hub having more than doubled since last February.
That’s going to continue, and here’s why…
You see, natural gas has two big things happening right now. The first one we talked about involved America’s Path to Electrification.
The United States is having a wake-up moment right now when it comes to its electric power demands. As I mentioned before, Goldman Sachs has projected that data center power demand will climb 160% between now and 2030.
The largest tech companies on the planet see this exorbitant demand for power, which is why they’re pouring billions of dollars into nuclear investments — hoping for both traditional and next-gen technology will be their knight in shining armor.
And to an extent, it will be… but adding nuclear capacity and building new plants isn’t something that’ll happen overnight. Constructing a new plant can take up to 8 years on average and cost upwards of $10 billion — and that’s assuming there are no delays or cost overruns!
In 2025, meeting those growing baseload power needs will be a job for natural gas, which we should also remember currently accounts for over 40% of U.S. electrical generation.
Of course, this is only half of the bullish story. For the first time in a few years, Europeans are feeling the sting of a colder-than-expected winter. The dreaded Dunkelflaute has reared its ugly head recently, proving that EU countries will have to rely more on natural gas to keep warm.
Yet, European gas storage has been dropping like a rock, which will only get worse over the next few months as the La Niña transition settles in, which will push cold air into the atmosphere and trap cold air from the Arctic.
As a little side-prediction, I also expect the EU to rethink their aggressive shuttering of nuclear and coal plants.
Or, they’ll do what they’ve been doing and turn to LNG. We will undoubtedly see countries like Germany push to build up their LNG infrastructure to support more imports.
Either way, I see it as a win-win scenario for natural gas in 2025
Natural gas truly was an underdog investment in 2024.
Between the mild winters we’ve seen over the last few years and the huge supply glut that has persisted for more than a decade, many natural gas bulls have been hiding their eyes praying for prices to turn around.
And despite a brief surge in 2022 from the Russian-Ukraine war, prices have been in the basement.
But things have already started to turn around, with natural gas prices at the Henry Hub having more than doubled since last February.
That’s going to continue, and here’s why…
You see, natural gas has two big things happening right now. The first one we talked about involved America’s Path to Electrification.
The United States is having a wake-up moment right now when it comes to its electric power demands. As I mentioned before, Goldman Sachs has projected that data center power demand will climb 160% between now and 2030.
The largest tech companies on the planet see this exorbitant demand for power, which is why they’re pouring billions of dollars into nuclear investments — hoping for both traditional and next-gen technology will be their knight in shining armor.
And to an extent, it will be… but adding nuclear capacity and building new plants isn’t something that’ll happen overnight. Constructing a new plant can take up to 8 years on average and cost upwards of $10 billion — and that’s assuming there are no delays or cost overruns!
In 2025, meeting those growing baseload power needs will be a job for natural gas, which we should also remember currently accounts for over 40% of U.S. electrical generation.
Of course, this is only half of the bullish story. For the first time in a few years, Europeans are feeling the sting of a colder-than-expected winter. The dreaded Dunkelflaute has reared its ugly head recently, proving that EU countries will have to rely more on natural gas to keep warm.
Yet, European gas storage has been dropping like a rock, which will only get worse over the next few months as the La Niña transition settles in, which will push cold air into the atmosphere and trap cold air from the Arctic.
As a little side-prediction, I also expect the EU to rethink their aggressive shuttering of nuclear and coal plants.
Or, they’ll do what they’ve been doing and turn to LNG. We will undoubtedly see countries like Germany push to build up their LNG infrastructure to support more imports.
Either way, I see it as a win-win scenario for natural gas in 2025