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BoA Merrill Lynch expects Natural Gas Prices to surge and double upwards of 100% in 2016


a5816293-d6ef-4975-9edc-fd87c739b5baNatural gas prices will likely continue to fall through the end of the year, but will start recovering in the second half of next year as lower output helps push prices up, Bank of America Merrill Lynch projected Thursday.

Expect natural gas prices to average $3.50 per million Btu in 2016 – said BoAML” 

While U.S. oil and gas production has slowed for the last six straight weeks as low prices force cutbacks, inventories for both are still at record highs and the oversupply has driven prices down.The U.S. Energy Information Administration early Thursday reported natural gas stockpiles rose by 52 billion cubic feet to 3,929 bcf last week. Stocks were 371 bcf above year-ago levels, and 147 bcf above the 5-year average of 3,782 Bcf, EIA said.

Natural gas futures were up $0.11 late Thursday afternoon to around $2.374. Still natural gas futures remain down by nearly a half from this time last year on the supply glut, are expected to fall lower as a warmer U.S. winter dampens demand.

“The market suffers from excessive stocks, soft end-user demand due to sluggish industrial growth and mild weather, and elevated production,” Bank of America Merrill Lynch said in its weekly report. “Lower spot prices could lead to less output in the future, which is likely to provide support to prices in 2H16.”

BoAML said it expects natural prices to average $3.50 per million Btu in 2016, compared to its projection of $2.75 per million Btu for 2015.

Federal Reserve Bank of Philadelphia Patrick Harker on Thursday said Marcellus Shale gas boom had “plateaued”.

“For 2016, we expect prices to recover as the market rebalances on a production roll-over and a structural increase in demand,” BoAML said.

The group also said the global oil market appears more balanced in the fourth quarter of 2015 and the likelihood of crude at $20 a barrel has faded, unless global demand falls sharply.

The report projects West Texas Intermediate, the U.S. crude benchmark will average $50.13 a barrel in 2015, $53 a barrel in 2016 and $59 a barrel in 2017. Brent, the global benchmark is seen around $55.66 a barrel in 2015, $55 a barrel in 2015 and $61 a barrel in 2017.

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