LONDON, July 7 (Reuters) - Ongoing tightening of liquefied natural gas (LNG) markets will lead to rising UK gas prices and result in a reconnection between spot markets and oil-indexed prices in Europe, Goldman Sachs said on Thursday.
“We recommend opening a long position in the UK NBP Q4 2012 contracts, as we expect a continued tightening of global LNG markets to lead to a reconnection between spot prices and oil-indexed prices in Europe, with spot gas pricing above oil-indexed in the beginning of the winter to attract incremental volumes for the peak demand period,” the U.S. bank said in a research note.
“This reconnection between spot and oil-indexed natural gas prices in Europe is not currently priced in the UK NBP forward curve,” the bank said.
The report also said it expected rises in other commodity markets, such as oil and metals.
“Progress in dealing with the Greek budget crisis and better economic data have improved sentiment around cyclical assets in recent days,” the bank said.
“We continue to expect further increases in commodity returns later this year and into 2012 (and) we reiterate our long trading recommendations for Brent crude oil, UK natural gas, copper, zinc and soybeans.” (Reporting by Henning Gloystein)