Goldman lowers winter US/UK natgas price forecasts

NEW YORK, Oct 13 (Reuters) - Goldman Sachs (GS.N) said in a commodities research note Monday it was lowering its U.S. and UK natural gas price forecasts on the back of downward revisions to its oil and coal outlooks.

"We are lowering our UK NBP price forecast through March 2010, as well as our 2008/2009 winter U.S. natural gas forecast as current credit constraints have exacerbated the global economic slowdown and have significantly damaged the current and forward oil demand outlook," the note said.

The lower oil prices led Goldman to revise down its UK NBP prices, which are arbitraged against the (oil-indexed) European Continental prices.

Goldman said it lowered its 2008/2009 winter, 2009 summer and 2009/2010 winter UK NBP prices to $15.35 per million British thermal units, $10.60/mmBtu and $14.20/mmBtu, respectively.

Goldman also lowered its 2008/2009 winter NYMEX natural gas forecast to $7.60/mmBtu, from $9.50/mmBtu previously.

"In the event of an inventory stock out in the winter, NYMEX natural gas prices would have to move up to residual fuel oil prices in order to reduce demand, and these prices have been downgraded as well as the rest of the oil complex, thereby lowering the upside to natural gas prices," the note said.

Goldman said it still expects summer 2009 NYMEX natural gas to price at parity with coal, but at lower levels.

"We still expect US natural gas to price at parity with Appalachian coal during summer 2009 in order to incentivize coal-to-gas fuel substitution and rebalance the market. However, Goldman Sachs JB Were has just downgraded their Newcastle (thermal) coal price forecast for 2009, on which we base our Appalachian coal price expectations, in response to softer European demand for coal."

The natural gas price parity with coal is now expected to take place at $7.30/mmBtu, the note said. (Reporting by Eileen Moustakis)