UBS has lowered its forward price projections for U.S. natural gas after inventories and export flows signaled a better-supplied market than the bank had expected. The bank cut its December 2026, March 2027 and June 2027 forecasts by $0.20 per mmbtu, pointing to storage builds that are tracking significantly ahead of the seasonal norm.
According to the most recent storage report, U.S. natural gas inventories reached 3.15 trillion cubic feet. That level is roughly 321 billion cubic feet, or 7.8%, above the five-year average. The stockpile position contrasts with conditions back in March, when inventories were largely in line with historical norms.
"This suggests that supply growth outpaced demand growth in recent months," UBS strategist Giovanni Staunovo said, adding that inventories could reach the "high 4 trillion cubic feet range" by the end of the injection season in October.
On the supply side, U.S. dry gas output has been essentially steady in recent months. Data show production holding in the 110-111 billion cubic feet per day range since February. While production remains elevated, year-on-year supply growth has moderated, slowing from 5.8 bcfd in February to 2.8 bcfd in July. UBS expects that deceleration to continue into the coming months.
Demand dynamics have also shifted. Liquefied natural gas exports, which strongly supported U.S. demand earlier in the year, have softened from their spring peak. Gross LNG exports set a record at 18.5 bcfd in March before easing to 16.6 bcfd in July. Staunovo noted that exports are not expected to reach a new annual record until later in the year, "keeping the market better supplied in the meantime."
Despite the downward revisions, UBS characterized its 2027 outlook as "positive relative to the current spot price," while describing that view as conservative and broadly consistent with prevailing market pricing. Given that stance, the strategist said he does not currently see active trading opportunities in natural gas.
Staunovo also highlighted infrastructure developments as a variable to monitor. Several natural gas pipelines under construction in Texas, Louisiana and Oklahoma are anticipated to expand regional transport capacity. If prices move higher, that added capacity could support increased production by enabling broader takeaway and distribution.
The bank's adjustments reflect a market where sustained production, tempered growth in year-on-year output and softer near-term export demand have combined to lift inventories above normal seasonal ranges. UBS's forecast cuts encapsulate that supply-demand balance, while the firm continues to track pipeline projects that might alter regional flows and production economics if market conditions change.
What to watch next
- Weekly storage reports and the trajectory of inventory injections through October.
- U.S. dry gas production levels and the pace of year-on-year growth deceleration.
- Gross LNG export volumes and timing for any renewed export-driven demand late in the year.
- Progress on pipeline projects in Texas, Louisiana and Oklahoma and whether added capacity influences production.