UBS Sees Value in Longer-Dated Natural Gas Prices Despite Storage Pressure

SEATTLE (Oil Monster): UBS analysts noted Thursday that natural gas prices have come under pressure due to a comfortable storage path, with inventories remaining well above the five-year average.

The pressure on natural gas prices stems from a combination of higher production and weaker demand for natural gas power, according to the UBS analysis. These factors have contributed to the current storage surplus compared to historical averages.

Despite the current downward price pressure, UBS maintains that higher prices will be necessary over the next 12 months. The firm specifically points to the need for price increases to secure adequate supply growth to support rising U.S. natural gas exports.

UBS analysts emphasized that the market will require stronger price signals to incentivize the production increases needed to meet future export demands. This supply-demand dynamic creates a potential price support mechanism in the medium term.

Based on this outlook, UBS continues to see value in longer-dated U.S. natural gas prices, suggesting potential investment opportunities in futures contracts with more distant expiration dates rather than in near-term natural gas positions.

Courtesy: www.investing.com