Investing.com — UBS warned of near-term downside risks to U.S. natural gas prices due to milder weather forecasts for February, but raised its price forecasts for the second half of the year on rising liquefied natural gas exports and tightening inventories.
Colder-than-average winter weather in the U.S. has driven natural gas demand to its highest levels since late 2022, lifting prices. Freeze-offs have disrupted supply, while the shutdown of the Freeport LNG export terminal has compounded volatility. UBS now expects natural gas inventories to end the withdrawal season in March at 1.7-1.8 trillion cubic feet, slightly below the five-year average.
Despite the potential for price pressure in the coming weeks, UBS revised its September and December price forecasts higher by $0.20 per million British thermal units, anticipating a boost from new export terminals, including Plaquemines and Corpus Christi Stage 3, alongside Mexican LNG facilities. UBS projects inventories at around 3.7 tcf by the end of October, down from a prior forecast of 3.9 tcf.
While UBS remains constructive on natural gas prices in the longer term, high roll costs and near-term risks are keeping the bank on the sidelines for now, with no immediate investment recommendations.