2016 was, in the main, a decent year for those who believe in the huge potential of U.S. natural gas. Chronic oversupply and a consistent build in reserves saw the price of the commodity fall dramatically in 2014 and 2015, but it bottomed in February of last year and has been recovering ever since. Despite that, prices are still around 50 percent lower than the peak three years ago, but there are good reasons to believe that the rally in gas prices will continue this year.
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President-elect Trump has made it clear that he intends to be friendly to U.S. energy and to unleash the potential of the country’s energy reserves. From a commodity price perspective though, the effects of a fossil fuel friendly administration and Congress are not straightforward. Increased U.S. oil supply, for example, could easily offset the planned OPEC production cuts, while making it less likely that all parties will stick to any agreement. It could be argued that encouraging more production in the already oversupplied natural gas market will also hold prices back, but there are a couple of significant differences.
Firstly, the domestic demand for U.S. gas is still increasing steadily. The Obama administration encouraged utilities to switch from coal and oil powered plants to natural gas, which was seen as a cleaner alternative. Even if the new President reverses that policy the changes that have already been made will not be reversed. Around one third…