Natural Gas Market Dynamics

UBS Analysis Overview
Analysts at UBS have highlighted that the current natural gas market requires higher prices in 2025 to sustain stronger export demand.

Price Trends
After a price increase following an August dip, UBS believes further rises are necessary to balance market conditions, especially considering export growth and market rebalancing efforts.

US natural gas prices began to climb at the end of August, after a low price period that prompted producers to reduce output. This, along with increased demand in the power sector—favoring natural gas over pricier coal—catalyzed lower weekly natural gas injections, resulting in market rebalancing.

Inventory Levels
Natural gas inventories are still above the five-year average. A surplus that exceeded 500 billion cubic feet before July has now fallen below 300 billion cubic feet, signaling a gradual rebalancing of supply and demand.

Forecast Adjustments
Despite these developments, UBS has cut its natural gas price forecasts due to delays in new US liquefied natural gas export terminals and potential weather disruptions like hurricanes. They have adjusted forecasts downward by USD 0.20/mmbtu across all timelines, with the Golden Pass export terminal expected to start around the end of 2025.

Future Price Expectations
UBS argues that a price rise in 2025 is essential to support anticipated export demand. While new export capacity is forthcoming, delays have extended the recovery timeline.

Risks to Consider
Several risks could influence price trajectories. A significant uncertainty is weather— an extremely mild winter could lower demand, postponing price increases, while a colder-than-expected winter could uplift prices due to increased heating needs.

Additionally, high roll costs present ongoing challenges for investors. Given these uncertainties, UBS advises market participants to remain cautious and refrain from short-term investment recommendations.