LNG price forecast lowered to for 2020
BAKU, Azerbaijan, Aug.7
By Leman Zeynalova – Trend:
Fitch Solutions has lowered its price forecast for liquefied natural gas (LNG) to USD2.1/mnBTU for 2020, Trend reports citing the company.
The company holds its view for USD2.4/mnBTU in 2021 on slowly accelerating production declines and a return of gas exports via LNG and pipeline from US onshore oil and gas fields.
“Supply looks to weaken as production output begins to slow further with active rig counts remaining depressed. The worst of demand related impacts from Covid-19 have passed and the relatively stable gas consumption numbers in May and June, when compared to 2019, have supported the recent rally in prices. Increasing feedgas supply to LNG export facilities will support reduction in gas stocks which remain stubbornly near five-year highs. Elevated stocks could dampen the seasonal price gains typically seen in the fourth quarter when winter demand spikes. The summer months of the stockpiling season will set the stage for the winter price surge, if cold weather returns early and if typical weather patterns prevail as the economic recovery continues to push demand higher,” reads the report released by Fitch Solutions.
The company believes that elevated natural gas stocks could derail the bullish short-term narrative.
“The late July weekly storage levels were close to breaching the five-year highs, which could spell trouble for prices into the second half of the year. The spring and summer seasons are typically the storage-building seasons, where stocks are built up to satisfy winter peak demand. However, elevated inventory levels could see less natural gas purchased in these low demand times, which would send prices downwards. Weather events could also see volatility rise, with higher temperature events seeing increased power usage and gas demand, or cooler summer weather seeing a falloff in consumption. That said, most significant weather events have a short duration impact, as the change in demand is quickly corrected once the event passes, leading to only marginal changes to the yearly price average. Moreover, elevated stock levels may lessen any spikes in prices, as markets remain well supplied,” said Fitch Solutions.
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