UBS prefers Santos to Woodside amid lower long-term LNG prices
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The news: UBS has flagged a higher risk of lower long-term LNG prices, with Woodside Energy among the Australian companies most likely to be negatively impacted.
The numbers: UBS analyst Tom Allen said he expects tight global LNG supply through 2027, before new liquefaction capacity outpaces demand growth, leading to lower utilisation rates and surplus capacity.
New UBS forecasts see US LNG utilisation drop from near full in 2027 to 77% by 2030.
UBS expects steady growth in global LNG demand at 5.8% per year between 2025 and 2030.
Emerging Asian markets are expected the be the primary driver of demand growth, with imports set to rise nearly 75% over the same period.
However, UBS forecasts points to a decline from $13 per million British thermal units (mmBtu) in 2025 to $11.5 in 2026 and $10.5 in 2027, softening further year on year to $8 in 2030. That compares to UBS' previous long-term price assumption of $10.5 per mmBtu by 2028.
Allen said he expects companies with significant exposure to spot gas prices, such as Woodside, to face pressure beyond 2028 unless mitigated with stronger contracting arrangements.
Meanwhile, Santos is UBS' preferred pick in the sector, with downside risk mitigated by Barossa gas coming online this quarter, plus Pikka oil from the first quarter of 2026.
UBS is 'neutral' on both Woodside and Beach Energy, the latter being its least favoured Australian energy exposure.
The source: UBS research
