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Why Natural Gas Demand is Soaring (and Why That Will Continue)

Trump Administration is Pro Natural Gas

Donald Trump, the 47th President of the United States, wasted no time in pushing his pro-energy agenda. Within hours of being sworn into office at the US Capitol, the unconventional returning President sat at a table inside the Capital One Arena in Washington DC and signed a flurry of executive orders, including a “National Energy Emergency.” The Executive Order states:

 “The energy and critical minerals (“energy”) identification, leasing, development, production, transportation refining, and generation capacity of the United Stats are all far too inadequate to meet our Nation’s needs.”

President Trump’s stump speech rallying cry of “drill baby, drill!” has immediately transformed words to action. In addition, Trump again removed the United States from the Paris Climate Accord, a signal that he is all in on the fossil fuel industry.

Natural Gas Demand is Set to Soar

S&P Global Insights and Antero Resources ((AR - Free Report) ) forecast that natural gas demand will more than double by 2030, driven by LNG exports, Mexico Exports, and, most importantly, AI data centers.

Zacks Investment Research
Image Source: Zacks Investment Research

Data center energy demand is insatiable. With big tech companies needing cheap, readily available energy, Wall Street legends like David Tepper see natural gas as the answer to these energy needs. In addition, LNG demand has been capacity-constrained, but the constraint is now easing, and North America’s LNG export capacity is on track to more than double by 2028.

Extreme Cold Weather Drives Natural Gas Prices

Another bullish catalyst driving natural gas demand is the extreme cold weather plaguing the United States. Many parts of the North East United States have experienced single-digit temperatures. However, it’s not just the North East – Florida recorded record snow fall this week. Because natural gas powers a little less than half the nation’s electricity and heats roughly 45% of homes, demand will likely remain hot.

Natural Gas Golden Cross Imminent

The United States Natural Gas Fund ETF’s ((UNG - Free Report) ) technical picture has improved dramatically. After being rejected by sellers at the 200-day for at least the past nine attempts, UNG has finally cleared the long-term trend filter with gusto. Meanwhile, the 50-day moving average is about to cross over the 200-day, signaling a bullish “Golden Cross.”

Zacks Investment Research
Image Source: Zacks Investment Research

Beyond the UNG ETF, several natural gas stocks act well including, EQT ((EQT - Free Report) ), Range Resources ((RRC - Free Report) ), and Comstock ((CRK - Free Report) ).

Bottom Line

AI data center power needs, extreme cold weather, and the untangling of capacity constraints are all reasons natural gas demand is soaring. These bullish demand trends should support growth in natural gas markets.  


 

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