Oil Faces Supply Glut While LNG Demand Booms - JPMorgan Upgrades RRC, Sees Gas Prices Rising

Wall Street is leaning into natural gas while pumping the brakes on oil.

JPMorgan's latest energy sector update signals a shift in the landscape, driven by growing U.S. gas demand and a looming oil glut in 2025.

Analyst Arun Jayaram and his team have crunched the numbers, revising forecasts and adjusting ratings accordingly. They’ve upgraded Range Resources Corp RRC and downgraded Vermilion Energy Inc VET as gas stocks catch fire and oil stocks face headwinds.

Natural Gas: The New Favorite

JPMorgan is doubling down on natural gas, citing three major secular tailwinds:

1. LNG Boom – The U.S. is ramping up LNG export capacity, set to increase by 11 Bcf/d by 2030, keeping demand strong.
2. Electrification Surge – AI-driven power consumption is skyrocketing, with U.S. gas turbine orders up 147% year-over-year.
3. Coal-to-Gas Shift – More utilities are pivoting to natural gas as a cleaner alternative to coal.

With these factors in play, JPMorgan sees long-term natural gas prices above $3.50 per MMBtu, potentially reaching $4.00+ in 2025-2026 to stimulate necessary supply growth. The firm's top picks in the sector remain Antero Resources Corp AR, EQT Corp. EQT and Excelerate Energy Inc EXE – stocks that have yet to fully reflect the bullish gas price outlook.

Read Also: Goldman Sachs Sees Strong ‘Secular Demand’ For Natural Gas, Raises Estimates On Two Industry Players

Oil's Not-So-Slick Future

On the flip side, oil is in for a rougher ride. JPMorgan's commodity team, led by Natasha Kaneva, expects the market to shift from a balanced 2024 to a 1.3 million barrels per day (MMBo/d) surplus in 2025, as non-OPEC+ production surges from Brazil, Guyana and Norway.

Adding to the pressure, OPEC+ is set to bring more barrels back into the market starting in April, just as global demand growth slows. The team forecasts Brent crude prices ending 2025 below $70 per barrel, a bearish signal for oil stocks. As a result, JPMorgan is trimming its EBITDA estimates for oil companies by 2% in 2025 and 10% in 2026, with its oil coverage group seeing a 17% drop in net asset value-based price targets.

RRC Up, VET Down

With this backdrop, JPMorgan has moved Range Resources to Neutral from Underweight, citing a more reasonable valuation and the company's shift toward production growth in 2026.

Meanwhile, Vermilion Energy gets the downgrade to Underweight, reflecting concerns over valuation and lower-than-expected earnings projections.

Takeaway For Investors

The energy market is at an inflection point, with natural gas equities emerging as the better bet.

With LNG demand booming, AI-driven power needs soaring and coal-to-gas switching in full swing, gas stocks could still have more room to run.

Meanwhile, oil investors should brace for volatility as the supply glut builds. JPMorgan's positioning? Bullish on gas, cautious on oil and keeping a close watch on the shifting energy tides.

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