CME/NYMEX natural gas is currently showing one of the steepest forward curve moves in recent memory. From the May front month price on Friday, 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 January 2026. The steep contango has been a fixture of the natural gas market since the spot price of gas collapsed in January of this year.
Presumably the optimism implied by the forward curve is due to cuts in production and expected increases in LNG exports. Lower-48 production is off about 5 Bcf/d from last year’s peak with several producers cutting production due to low spot prices, and reduced drilling in dry gas plays (Haynesville rig count off 20% this year). LNG exports will be increasing as the Freeport LNG facility returns to full capacity (May 2024) and new terminals prepare for startup over the next few months. First LNG at Corpus Christi's mid-scale expansion is expected by the end of the year. Venture Global’s Plaquemines LNG is expected to begin commissioning later 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 dropped significantly with the spot price of natural gas (solid blue line), the long end of the curve has been relatively well anchored, with an annual average around $4/MMbtu in 2026.
