Natural-Gas Prices Are on Fire: What's Driving the Surge and How to Invest

Natural-gas prices have been on a tear in recent months, with no signs of slowing down. The global demand for natural gas has been growing, particularly in Asia, as countries aim to transition towards cleaner energy sources. This increased demand, coupled with geopolitical tensions and limited supply, has put pressure on the natural gas market, driving up prices. Let's delve into the primary factors driving the recent surge in natural gas prices and explore investment opportunities in this red-hot market.



1. Increased Demand: The global demand for natural gas has been growing, particularly in Asia, as countries aim to transition towards cleaner energy sources. This increased demand has put pressure on supply, driving up prices. According to the Energy Institute - Statistical Review of World Energy, 2024, the global demand for natural gas is expected to continue to rise, further tightening the market.
2. Geopolitical Tensions: Geopolitical instability in major production areas, such as the Middle East, South America, and Africa, has led to volatility in natural resource prices. The ongoing conflict between Russia and Ukraine, as well as the COVID-19 pandemic, have exacerbated geopolitical risks, causing further price fluctuations in the natural gas market. For instance, the situation in the Middle East and other major production areas continues to be volatile, affecting natural gas supplies and prices (Kollias et al., 2013; Dogan et al., 2022; Norouzi, 2021; Zhikai Zhang et al., 2023).
3. Limited Supply: The supply of natural gas has not kept pace with the growing demand, leading to a tightening of the market and increased prices. In the United States, natural gas production has declined by 6.7 bcfd over the past 13 days, reaching a four-week low of 100.1 bcfd (Source: EIA). This decline in production, coupled with increased demand, has contributed to the surge in natural gas prices.
4. LNG Exports: The surge in LNG exports, particularly from the United States, has also contributed to the increase in natural gas prices. In February 2025, LNG feedgas hit an all-time high of 16.2 bcfd, surpassing the previous record of 16.0 bcfd set on Monday (Source: EIA). This increase in LNG exports has further tightened the global natural gas market, driving up prices.

The growth of renewable energy sources (RES) also plays a significant role in the natural gas market. In the short term, the growth of renewable energy sources can lead to temporary spikes in natural gas prices. However, in the long term, the growth of renewable energy sources is expected to have a downward pressure on natural gas prices. As renewable energy sources become more cost-competitive and their capacity increases, they can displace natural gas in the electricity generation mix, leading to a decrease in natural gas demand and ultimately putting downward pressure on prices.

Investment opportunities in the natural gas market abound, particularly in the energy transition and infrastructure development sectors. As the energy transition progresses, there will be a need for infrastructure to facilitate the integration of renewable energy sources into the grid. This infrastructure may include natural gas-fired power plants that can provide flexible and dispatchable power to balance the intermittency of renewable energy sources. Additionally, the growth of renewable energy sources may lead to increased demand for natural gas as a feedstock for the production of hydrogen through processes such as steam methane reforming (SMR) or autothermal reforming (ATR).

In conclusion, the recent surge in natural gas prices is driven by increased demand, geopolitical tensions, limited supply, and LNG exports. The growth of renewable energy sources also plays a crucial role in the natural gas market, with both short-term and long-term impacts on prices and investment opportunities. As the energy transition progresses, investors should consider the potential impacts of geopolitical events and macroeconomic indicators on energy infrastructure projects and companies, as these factors can influence project viability and company performance. By staying informed about market trends and investing in strategic sectors, investors can capitalize on the opportunities presented by the surging natural gas market.