Global Gas Squeeze Could Last Through Next Summer
Natural Gas Prices What I Cover Irina Slav has been writing about global energy markets since 2007, covering the oil and gas industry, energy security, commodities, and the… Global natural gas supply is likely to remain tighter than it should be until next summer at least, and it could cause prolonged demand destruction.
Should this scenario materialize, it would deliver a severe blow to Europe, as it already struggles to cover its winter gas needs ahead of the official start of heating season—but Asia won’t be happy about it, either.
The prediction comes from the International Gas Union, an industry association that covers 90% of the world’s gas producers.
“The market right now is saying that they see the conflict getting prolonged,” IGU’s secretary general Menelaos YdreostoldReuters this week.
“Europe is starting to outbid Asia because they need to refill storage levels,” the executive added, noting that the price surge in natural gas has already destroyed some demand, but it is as of yet unclear whether this is a temporary dip or it could evolve into permanent destruction.
Chances are it is the former, based on a recentreportby Global Energy Monitor that found countries in Southeast Asia were still building natural gas-fired power plants despite the price inflation in gas caused by the Middle East war.
Asian countries are also building more LNG import capacity, despite the price surge.
“There is some short-term demand destruction.
The question is whether it rebounds after everything settles or whether there are some longer-term implications around policy,” Ydreos told Reuters, voicing what must be a legitimate worry in the gas industry about the outlook for demand.Related: China Could Cut Fuel Exports in October as Inventories Plunge Goldman Sachs is not too concerned about the long-term future of gas demand, however.
In areportthis week, the investment bank painted an optimistic scenario for this winter, saying prices in Europe could drop from around 70 euro per MWh to 50 euro per MWh if the flow of liquefied natural gas out of the Persian Gulf improves.
The chances of that happening may be slim, but it appears Goldman Sachs makes its price estimates under the safe assumption that these chances are never zero.
Be that as it may, Goldman’s analysts still expect European gas prices to average 70 euro per MWh, which is equal to some $80.
| Product | Price | Change |
|---|---|---|
| Brent Crude | $102.14/bbl | +0.34% |
| WTI Crude | $96.90/bbl | +0.21% |
| EN590 Diesel | $846/MT | +0.18% |
| Jet Fuel A-1 | $1090/MT | +0.55% |
| Mazut M100 | $450/MT | -0.15% |
| Bitumen 60/70 | $470/MT | +0.08% |
| Sulphur Gran 99.5% | $470/MT | -0.44% |
| Urea 46% Gran | $650/MT | +1.12% |
| NPK 16-16-16 | $460/MT | -0.28% |
| Nat Gas TTF | $15.42/MMBtu | +0.92% |
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