The risk of lower gas prices still looms, according to UBS, prompting analysts at the Swiss bank to cut its natural gas medium-term assumptions.
The global Liquefied Natural Gas market is set to remain fairly tight through 2027, UBS said. However, the forthcoming wave of liquefaction capacity is likely to outpace demand growth, leading to lower utilisation rates and the emergence of spare capacity, most notably in the U.S.
“We expect lower utilisation rates to place pressure on LNG prices and now assume prices decline from~$13/mmBtu in 2025 to $11.5 in 2026 and $10.5 in 2027, softening further to $8 in 2030,” UBS said.
“We believe fears associated with new LNG supply coming are well known by the market with each 1% reduction in LNG price having a 0.7% impact on CFFO [cast flow from operating activities,” UBS added.
Consensus estimates already assume a 30% decline of prices to $9/mmbtu by 2027 and staying broadly flat until 2030.
“As a result, we think that any price decline below $9 would come to the detriment to estimates all else equal,” UBS added.
The Swiss bank sees Equinor (OL:EQNR) shares as most vulnerable to lower prices with distributions at risk.
“On the contrary, companies with exposure to market growth and no direct price risk such as GTT (EPA:GTT) amongst the Services sector should do well. We believe large LNG players such as Shell (AS:SHEL) and TotalEnergies (EPA:TTEF) should fare reasonably well given their sophisticated marketing businesses and having already shifted exposure to oil-price linked sales.”
Source :
https://www.investing.com/news/commodities-news/ubs-lowers-natural-gas-prices-forecasts-4236856
