BAKU, Azerbaijan, April 24
By Leman Zeynalova - Trend:
Price forecasts for both coal and gas have been revised down by the World Bank (WB) for 2020, Trend reports citing the WB.
“Natural gas prices are expected to fall by 25 percent, and coal prices by 17 percent, before recovering in 2021. The slowdown in global economic growth will likely lead to weaker consumption for both commodities. Partially offsetting that, natural gas production growth, particularly in the United States, is expected to be weaker in 2020 as a result of a fall in new drilling activity—gas rigs have declined alongside oil rigs,” reads the report.
The main risk to the forecast for both commodities, similar to oil, is a slower end to the pandemic, both through a longer duration of mitigation measures and a deeper global recession, according to the Bank.
US natural gas prices declined 12 percent between January and March, while European prices fell 25 percent, reflecting their greater indexation to oil prices, according to the WB estimates.
“Spot gas prices in Asia have also fallen. Price differentials between natural gas grades continue to decline. The weakness in natural gas prices was due to both weak demand and ample global supply. Heating demand at the start of 2020Q1 was particularly weak as a result of an exceptionally warm winter across the world, while demand toward the end of the quarter and into April has been increasingly impacted by COVID-19 mitigation measures,” said the report.
The WB reminds that forty percent of natural gas is used for electricity, and around 15 percent for industrial uses, both of which are increasingly being affected by shutdowns.
“High global production partly reflects increasing LNG exports, led by the United States. Prices have fallen close to production cost floors in the US and Europe, which may induce shutdowns and reduced investment in new capacity, while some coal-to-gas switching may also occur to lift demand,” reads the report.
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