UBS Investment Research raised its forecast for the price of natural gas to $9 per 1,000 cubic feet from $7.25 per 1,000 cubic feet.
“We believe improved domestic natural gas demand trends, soaring coal prices and likely increases in the cost of electricity generation, and increased competition for LNG (liquefied natural gas) from the Asian Pacific region is driving natural gas prices upwards,” said analyst William A. Featherston.
“Given the increasing number of factors impacting U.S. natural gas prices, we expect increased volatility going forward. In fact, we believe the new range for natural gas prices could be as wide as $7 to $14 (per 1,000 cubic feet.)”
UBS also raised its outlook for coal prices because of a number of factors, including higher production costs, impediments to Appalachian production growth, higher natural gas prices, increased exports and declining imports.
UBS boosted its long-term price for metallurgical coal — used in making steel — to $150 per ton from $125 per ton. Central and Northern Appalachian coal was pegged at $75 per ton, up from $63 per ton. Midwest coal rose to $43 per ton from $37 per ton, and UBS pushed Powder River Basin coal to $18 per ton from $17 per ton.