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Gas prices to continue upward trend by early 2022

Oil&Gas Materials 13 September 2021 12:07 (UTC +04:00)
Gas prices to continue upward trend by early 2022

BAKU, Azerbaijan, Sept.13

By Leman Zeynalova – Trend:

Gas prices, which have grown significantly all over the world due to unseasonable weather and supply disruptions, will continue upward trend by early 2022, Kieran Clancy, Commodities Economist at Capital Economics, UK-based research and consulting company told Trend.

The gas price in Europe has neared $730 per 1,000 cubic meters on Sept.13, ICE exchange data shows. October futures on the TTF hub in the Netherlands reached $727 per 1,000 cubic meters.

“Even if the weather normalizes and supply rebounds soon, we expect prices to remain high at least into the start of 2022 as stocks will still need to be rebuilt from their current lows,” said the expert.

He pointed out that unusually cold winters and warm summers in Asia and much of Europe have inflated demand for electricity and its key inputs (coal and natural gas) for several months now. “As economists, we cannot pretend to have any insight into when the weather will normalize. However, even if the upcoming winter in the Norther Hemisphere proves to be mild, there is good reason to expect the prices of coal and natural gas to remain elevated.”

Clancy believes that Hurricane Ida in the US will also have an upward pressure on gas prices in Europe and Asia.

“Hurricane Ida has led to a sharp decline in US natural gas output. As the US is the world’s third largest exporter of LNG (accounting for 10-15 percent of global LNG exports), there will also be a knockon impact on the supply of gas in Europe and Asia. That said, output bounced back relatively quickly from disruptions caused by the deep freeze in Texas and the colonial pipeline outage earlier in the year. And any disruption to US LNG exports to Europe may be offset by increased natural gas supply via the Nord Stream 2 pipeline from Russia, which is scheduled to come online next month. Nevertheless, even if supply constraints start to ease and demand deflates, stocks of coal and natural gas will still have to be rebuilt from their current lows. Although natural gas stocks in Europe are currently being replenished ahead of the winter months, they remain substantially below their pre-pandemic five[1]year range,” he said.

With that in mind, Capital Economics raised year-end forecasts for both natural gas and coal prices. “We are sticking with our view that prices will fall back next year as supply rebounds and demand growth slows, though clearly much will hinge on the normalisation of weather patterns. Either way, higher-for-longer coal and natural gas prices could speed up the transition away from these fuels and towards renewable sources of energy in electricity generation, which will be the key factor weighing on the demand for both commodities in the longer term.”

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Follow the author on Twitter: @Lyaman_Zeyn

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