UBS: Natural Gas - FJElite

Since our last update, US natural gas prices have edged higher but remain below USD 3/MMBtu. Warmer weather has likely supported prices by slowing weekly inventory injections in recent weeks. US natural gas inventories currently stand 148 billion cubic feet above the five-year average, down from a surplus of 198 billion cubic feet in early August. Even so, at the current pace of injections, inventories are expected to remain at elevated levels when the injection season ends in late October.

The Energy Information Administration (EIA) estimates that natural gas demand from the power sector reached a 2026 high of 48.92 billion cubic feet per day in August, slightly below the record of 49.28 billion cubic feet per day set in July 2024. Despite total US electricity consumption reaching an estimated record of 426 billion kilowatt-hours in August, natural gas did not benefit as much as in previous peiiods because of competition from other energy sources, including renewables. Meanwhile, liquefied natural gas (LNG) exports have continued to move broadly sideways, although a pickup is still expected later in the year.

Our 2027 outlook remains positive relative to the current spot price, although it is conservative and broadly aligned with market pricing. We will continue to monitor the implications of new natural gas pipelines under construction in Texas, Louisiana, and Oklahoma. These projects are likely to expand regional transportation capacity and could support production growth if prices rise.