U.S. Natural Gas Has Turned, Says Analyst (UNG)

In a research note Tuesday, Deutsche Bank analyst Stephen Richardson discussed natural gas. In his view, the "cycle has turned."

"Oversupply was generated by resource expansion, as unconventional supply growth surpassed expectations. We are focused on long-cycle & stable demand growth from the industrial complex, which has likely been masked by shorter term seasonal factors. Expansion & Greenfield projects promise to alter the trajectory of demand growth with an inflection point by 2016. Our bottom up, project by project view of demand identifies 2.3 Bcf/d," said Richardson.

"The supply side has dominated natural gas balances for 5+ years. Revisions to resource in the ground, efficiency gains in the field, and explosive growth from the Marcellus have all been drivers. Oversupply drove prices lower, and encouraged alternative fuel switching, primarily from power generation to balance the market (2012/13). A new baseload of natural gas demand on the industrial side is just emerging as a result of multi-year investments. This on-shoring of energy intensive industries is predicated on stable, available domestic energy sources," he added.

Traders are watching natural gas futures and United States Natural Gas Fund, Lp Unit (NYSE: UNG).

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