Simmons and Company estimates demand for U.S. natural gas will climb from about 70 billion cubic feet, or bcf, per day, to as much as 90bcf/day by 2020.
It says markets have become complacent about the ability of gas producers to meet demand. Low natural gas prices — now trading on the spot market at around $3.70/bcf — have led producers to shut down more than half their drilling rigs since late 2011.
Pearce Hammond is managing director of Simmons & Company. He says higher demand will start pushing up prices within eighteen months.
“We’re not calling for double-digit prices or anything like that, like there was a few years ago. But could the forward curve move from kind of the longer-term price of $5.00 to a longer-term price of $6.00? Yes, we think that’s the sort of move that could happen.”
Major factors driving the increase in demand include exports of liquefied natural gas, piped exports to Canada and Mexico, and power generation.