UBS Cuts Natural Gas Price Forecasts on Robust US Supply and High Inventories

UBS has lowered its natural gas price forecasts for late 2026 and early 2027, citing a combination of resilient U.S. supply and softer liquefied natural gas (LNG) exports that have left the market well-supplied and pushed inventories significantly above historical norms.

Swelling Inventories Drive Downgrade

The bank reduced its price forecasts for December 2026, March 2027, and June 2027 by $0.20 per million British thermal units (mmbtu). This revision is driven by inventory builds that are running well ahead of the seasonal average. According to a recent storage report, U.S. natural gas inventories stood at 3.15 trillion cubic feet (Tcf), which is 321 billion cubic feet (bcf), or 7.8%, above the five-year average.

This marks a significant shift from March, when storage levels were broadly in line with historical norms. "This suggests that supply growth outpaced demand growth in recent months," UBS strategist Giovanni Staunovo noted in the report. The bank projects that inventories could reach the "high 4 trillion cubic feet range" by the end of the injection season in October.

Resilient Production and Softer Exports

On the supply side, U.S. dry gas production has remained steady in the 110-111 billion cubic feet per day (bcfd) range since February, according to data from the Energy Information Administration (EIA). While year-on-year supply growth has moderated, falling from 5.8 bcfd in February to 2.8 bcfd in July, the consistent output has kept the market amply supplied.

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Meanwhile, demand from overseas has softened. Gross LNG exports fell from a record 18.5 bcfd in March to 16.6 bcfd in July. Staunovo expects exports will not reach a new record high until toward the end of the year, "keeping the market better supplied in the meantime."

Market Outlook

Despite the downward revision, UBS stated that its 2027 outlook remains "positive relative to the current spot price." However, the strategist described the view as conservative and largely aligned with current market pricing. As a result, UBS said it does not currently see active trading opportunities in the commodity.

The bank also noted it will continue to monitor new natural gas pipelines under construction in Texas, Louisiana, and Oklahoma. These projects are expected to expand regional transport capacity and could support further production growth if prices move higher.