UBS provided information on recent trends impacting natural gas prices in the United States. According to the company, two main factors have helped support prices this month.
The first is that natural gas production in the United States has remained below 100 billion cubic feet per day as lower prices have prompted production shutdowns and pipeline maintenance efforts. The second factor is rising U.S. liquefied natural gas (LNG) exports, which went from a temporary dip at 9 billion cubic feet per day in mid-April to 13 billion cubic feet per day.
UBS noted that while increased LNG exports and the expected recovery in production following the completion of pipeline maintenance are positive for prices, there are concerns that a further price rally could be counterproductive.
Higher prices could potentially lead to the return of production that has been interrupted, which is not desirable as lower production levels than at the beginning of the year are necessary to avoid excessive inventory levels by the end of the injection season at end of October.
Furthermore, rising prices could discourage the use of gas in the energy sector, reducing the economic benefit of switching from coal to gas.
Looking ahead to 2025, UBS maintains a constructive outlook, thanks to the expected launch of new LNG export terminals and increased pipeline exports to Mexico. The company believes that higher prices will be needed in 2025 to support increased export demand.
However, UBS also flagged the risk of potential delays in starting exports from the Golden Pass export terminal, which could move from the first to the second half of 2025.
Despite UBS’s projection of higher natural gas prices over the next six months, futures markets have already priced in a significant early rally, suggesting that traders could expect an even stronger price rise.
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