Goldman Sachs maintains its optimistic forecast for U.S. natural gas prices, setting a $4.50/mmBtu target for Summer 2026 Henry Hub. The bank identifies potential risks to this outlook, especially if there are delays in producer investment.

Goldman expects increased drilling activity will be needed to support sustained U.S. gas production growth through 2026. Current investment levels may not meet the anticipated future demand.

Goldman Sachs Recommendation

The bank recommends a long position in April 2026 Henry Hub contracts, citing favourable fundamentals and limited supply-side responsiveness.

Henry Hub, located in Erath, Louisiana, serves as the main pricing benchmark for U.S. natural gas. It is the delivery point for natural gas futures traded on the New York Mercantile Exchange (NYMEX).

The $4.50/mmBtu figure refers to the expected price per million British thermal units, with Henry Hub as the basis. This price is similar to “WTI crude” for oil as a central benchmark for natural gas trading and contracts.

We believe the fundamental outlook for U.S. natural gas remains strong, justifying a target of $4.50/mmBtu for summer 2026 contracts. The primary risk to this forecast is that producers will not increase investment quickly enough to meet future needs. This creates an opportunity for traders who share our long-term perspective.

Short Term Strategy

In the near term, we see any price weakness as a buying opportunity. The U.S. Energy Information Administration’s latest report showed natural gas storage at 2,893 billion cubic feet, which is over 25% higher than the five-year average and is currently weighing on prices. This short-term pressure presents an attractive entry point for longer-dated positions.

The bank’s concern about investment levels is validated by current drilling activity. The Baker Hughes rig count from early June 2024 shows only about 98 active natural gas rigs, a sharp drop from over 150 a year ago. This lagging investment makes it very difficult for supply to quickly respond to the demand surge we anticipate.

Looking forward, a significant increase in demand is almost certain due to new liquefied natural gas (LNG) export facilities like Plaquemines and Golden Pass coming online through 2025. This structural increase in demand will clash with the sluggish production growth caused by today’s low drilling activity. We see this as the primary catalyst for higher prices.

History shows how quickly this market can tighten, with prices surging above $9.00/mmBtu in 2022 when supply concerns dominated the market. While we are not forecasting such a dramatic spike, it highlights the significant upside potential if production fails to keep pace with demand. The current market complacency about future supply is a mistake we can capitalize on.

Therefore, traders should use the current price softness in the coming weeks to build long positions in deferred contracts like the April 2026 Henry Hub futures. We recommend using options or futures to establish a bullish stance, taking advantage of what we view as a temporary disconnect between today’s price and tomorrow’s reality.

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