Goldman Sachs outlook on the future of American natural gas: current prices already reflect expectations of decline, long-term buying opportunities emerging.

On April 16th, Goldman Sachs released a research report stating that, in light of changes in US tariff policies and their impact on US and global economic growth, the bank has updated its global natural gas supply and demand balance forecast. Goldman Sachs estimated how a mild recession in the US would further affect natural gas demand and price expectations for Henry Hub. The bank stated that the price of natural gas in the US has already priced in the possibility of an economic recession, which has strengthened their confidence in their trading recommendation to "long the April 2026 NYMEX natural gas contract." However, the bank added that in the scenario of an economic recession, US natural gas prices could still potentially further decline from their current levels, especially considering the possibility of large-scale cross-asset liquidation. Regarding the US natural gas market, Goldman Sachs stated that due to the expected slowdown in economic growth, the bank has lowered its forecast for US natural gas demand. The bank mentioned that the net impact of the estimated economic growth downgrade on the natural gas supply and demand balance is not sufficient to warrant an adjustment to their price forecast for Henry Hub, thus maintaining their forecast for the summer 2025/average 2026 NYMEX natural gas price at $3.90/$4.60 per million British thermal units (MMBtu). Specifically, considering the uncertainty around US tariff policies, Goldman Sachs discussed in their research report how natural gas demand and prices would change in the scenario of the US entering an economic recession. The bank used a "mild US recession" scenario, which aligns with their economists' expectations following the Trump administration's announcement of "equivalent tariffs" on April 2nd, projecting a 1.0% year-on-year decline in US GDP in the fourth quarter of 2025 (compared to the bank's current baseline scenario of 0.5% year-on-year growth). In this recession scenario, Goldman Sachs reduced their expectations for the growth rate of total US natural gas demand for the remaining time in 2025 and 2026 by 0.5/0.9 billion cubic feet per day (Bcf/d) to 1.0/1.3 Bcf/d, mainly due to slower growth in industrial and power generation gas usage. Without other offsetting factors, this would lead the bank to revise their expectations for natural gas inventories at the end of October 2025 and 2026 to increases of 74 Bcf and 381 Bcf respectively, to 3970 Bcf and 4053 Bcf. Although the high inventory levels at the end of October 2025 are not expected to cause oversupply, Goldman Sachs believes that these levels are sufficient to keep US natural gas prices below the high end of the $2.00 to $3.75 range per MMBtu, slightly lower than their current forecast of $3.90 per MMBtu. Furthermore, in this recession scenario, the significant rise in inventories by the end of October 2026 would lessen the urgency for new natural gas drilling. Specifically, US natural gas prices would need to be high enough (Goldman Sachs believes they would need to reach $4.50 per MMBtu) to incentivize new drilling activities for the winter seasons of 2025-2026. In a recession scenario, this incentive may be delayed until the second half of 2026. Therefore, Goldman Sachs believes there is downside risk to the Henry Hub price in 2026, potentially decreasing from their current forecast of $4.60 per MMBtu to $4.00 per MMBtu (current futures price is $4.05 per MMBtu). Additionally, Goldman Sachs stated that they have lowered their expectations for the growth of natural gas demand in China by 3.2 percentage points, citing that the trade war has led to a slowdown in Chinese natural gas demand. The bank added that the weakening Chinese natural gas demand would make it easier for Europe to obtain liquefied natural gas supply at lower prices to rebuild natural gas inventories before the next winter. Therefore, last week, the bank lowered their forecast for the 2025 European benchmark Dutch TTF natural gas price from 49 per megawatt hour to 38 per megawatt hour, with the forward price at 35 per megawatt hour.