Investing.com — U.S. prices have surged in early 2025, with spot Henry Hub up approximately 12% year-to-date and the Cal 25 strip increasing by about 20%, analysts at Mizuho (NYSE:) noted this week.
The rapid rise has sparked debate among investors about whether it is time to lock in gains or expect further increases.
Mizuho analysts said that while some fundamental drivers of higher gas prices were anticipated, the magnitude and speed of the price rally have surpassed expectations.
“LNG project start-ups, disciplined supply growth, sub-maintenance level rig activity, and secular domestic demand” were identified as key factors contributing to a potentially undersupplied market for 2025.
Despite these bullish fundamentals, the firm said the question remains whether prices have climbed too high too quickly.
One crucial indicator Mizuho uses to gauge the near-term direction of gas prices is the U.S. Storage Days of Demand on Hand.
They explained that as of January 10, 2025, U.S. natural gas inventories could only cover 22.2 days of demand, compared to the five-year average of 25 days for this time of year.
Mizuho notes that this is the lowest level observed in the past five years for this period, suggesting tighter supply conditions.
However, the analysts caution against the risk of extreme price moves. “The cure for high prices is high prices,” as markets tend to balance through increased supply or decreased demand, wrote the firm.
Despite this, current conditions—peak winter season, muted rig activity, rising LNG feedgas demand, and colder weather forecasts—suggest short-term strength may persist.
Mizuho maintains a conservative full-year 2025 outlook with an estimated average gas price of $3.50, compared to the current strip price of $3.84. The firm highlights Coterra Energy (NYSE:), BKV, EXE, and EQT (ST:) as preferred gas-exposed stocks.
