UBS provided insight into recent trends impacting US prices. According to the company, two key factors helped support prices this month.
The first is that U.S. natural gas production has remained below 100 billion cubic feet per day, both due to lower prices that have prompted production shutdowns and pipeline maintenance work. The second factor is an increase in US liquefied natural gas (LNG) exports, which have risen from a temporary dip to 9 billion cubic feet per day in mid-April, to 13 billion cubic feet per day more recently.
UBS noted that while the increase in 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 increase could be counterproductive.
Higher prices could potentially lead to the return of production that has been halted, which is not desirable as lower production levels compared to the beginning of the year are needed to avoid excessive inventory levels towards the end of the injection season at the end of October.
In addition, higher prices may discourage the use of gas in the energy sector by reducing the economic benefit of switching from coal to gas.
Looking ahead to 2025, UBS maintains a constructive outlook, driven by the expected start-up of new LNG export terminals and increased pipeline exports to Mexico. The company believes that higher prices will be needed in 2025 to support stronger export demand.
However, UBS also flagged the risk of possible delays in the start of exports from the Golden Pass export terminal, which could shift from the first half of 2025 to the second half.
Despite UBS’ projection of higher natural gas prices over the next six months, futures markets have already priced in a significant expected rally, suggesting traders may expect even stronger price increases.
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