UBS has issued a cautious near-term outlook for U.S. natural gas prices, citing milder February weather forecasts but remains optimistic about higher prices later in the year due to expanding liquefied natural gas (LNG) exports and tightening inventories.

Key Near-Term Challenges

1. Milder February Weather: Forecasts for milder-than-expected weather are expected to suppress heating demand, creating downside pressure on prices.
2. Supply Disruptions: Freeze-offs have affected production, while the shutdown of the Freeport LNG terminal has amplified market volatility.
3. Inventory Levels: UBS predicts natural gas inventories to end the withdrawal season in March at 1.7-1.8 trillion cubic feet (tcf), slightly below the five-year average, leaving room for seasonal price fluctuations.

Longer-Term Positives for Natural Gas Prices

UBS remains bullish on natural gas for the latter half of the year, citing the following factors:

1. Rising LNG Exports:
   • Plaquemines and Corpus Christi Stage 3 Terminals: New U.S. LNG export facilities are expected to come online, boosting demand.
   • Mexican LNG Facilities: Growing infrastructure in Mexico will further support export-driven demand.
2. Tighter Inventory Forecasts:
   • UBS revised its October inventory projection to 3.7 tcf, down from 3.9 tcf, reflecting tighter supply conditions.

Revised Price Forecasts

• Short-Term Risks: UBS sees the potential for price weakness due to mild weather.
• H2 2025 Outlook: The bank raised its September and December natural gas price forecasts by $0.20 per million British thermal units (MMBtu), reflecting the anticipated export-driven demand and lower inventories.

Investor Considerations

1. High Roll Costs: UBS highlights elevated roll costs, which make it cautious about recommending immediate investment in natural gas futures or ETFs.
2. Watch for Infrastructure Milestones: The completion of export terminals and pipelines could offer price support later in 2025.
3. Weather Variability: Changes in weather forecasts could significantly impact short-term market dynamics.

For further insights into energy market trends, financial metrics, and inventory forecasts, the Sector Historical Overview API can provide valuable data for tracking market movements and price trends.