Natural Gas Futures are down 165% to $2.795, and UBS pointed to a couple of factors that are driving values in this market.

UBS says that the primary driving factor is low natural gas production. That has diminished to less than 100 billion cubic feet each day. Gas production is down because of pipeline maintenance work as well as production shut ins.

UBS revealed that the secondary factor is natural gas exports, particularly LNG, increasing steadily. The experts there went up from 9 billion cubic feet per day (April numbers) to 13 billion.

Russia has extended its sea borders to include more areas that could cut into the oil trade. We may start to see repercussions from this soon.

Prices are going in the right direction, but if there is a further uptick, that could hurt the industry. High prices could make production levels increase and cause inventory excesses that will harm the market in the longer term.

The oil and gas markets have been struggling with high inventory levels for much of the year, and the concern is those levels will stay elevated or go higher.

FOMC Meeting Inflation News

The natural gas market has to be careful in the current financial climate. The recent FOMC meeting covered high inflation and how stubbornly the inflation rate has held on. It has not dropped as expected this year, which has created a hawkish sentiment among the Federal Reserve.

Investors are likely to hold onto their money and be careful about spending it where they do not have to. US stocks are low at the moment because of the high inflation reading, and natural gas markets need to be careful as well about how the news will affect them.

We may see inventory levels of natural gas start to decrease later on this year as we get into the fall season. Production can then safely ramp up in anticipation for the colder winter weather and the increased demand for natural gas.