US natural gas prices will average $4.20/MMBtu over the next six months and possibly reach $5/MMBtu early next year on improving fundamentals, Morgan Stanley analysts said.
As fears that the US would run out of storage by year's end fade and demand increases on colder weather, the stage is set for stronger gas prices in the first half of 2013, analysts with the bank said in a Thursday report.
Morgan Stanley also said producers will be slow to boost output in response to rising prices because of "logistical challenges, more attractive oil economics and higher break-even costs outside the Marcellus."
Such a delayed response will create a year-on-year deficit in storage by the end of 2012 and early 2013, likely lifting prices to the level of $5/MMBtu in the early 2013, the bank said.
