BAKU, Azerbaijan, Sept.21
By Leman Zeynalova – Trend:
Elevated Henry Hub gas prices will linger throughout 2022, Trend reports with reference to Fitch Solutions.
“Our long-term view for prices remains broadly bullish though higher prices will likely curb consumption particularly in the power generation sector where alternatives including coal and renewables present better pricing. We have increased our 2022 forecast to USD4.2mmBTU from USD3.3/mmBTU, on the expectations that elevated prices will linger throughout 2022, despite the risk of decreased demand from higher prices as demand for exports will keep supplies tight. We expect US shale output returning in that timeframe for both natural gas and oil, whose production is strongly tied to associated gas output, before falling back into balance in 2024. This view aligns with consensus pricing on wide expectations for stable to slight growth in natural gas consumption domestically and higher LNG exports in the long term,” said the company.
In line with its previous bullish outlook Fitch Solutions has increased its price forecast for Henry Hub this quarter as increased global LNG prices raise exports and slow production growth create severe fundamental imbalances with the seasonal storage falling well below historic levels for this time of year.
“The fundamental imbalances will likely show a further surge in prices this Winter when seasonal prices typically peak before new drilling eases the supply shortages for late 2022. Our new forecast is a significant increase of 26% from the previous forecast with Henry Hub now expected to average USD3.9/mmbtu for 2021. 2022 natural gas prices look to carry gains from 2021 with little relief expected from upstream suppliers until midway through the year to average USD4.2/mmbtu for 2022.
Henry Hub front month prices are nearly USD2.3/mmbtu higher than the 5-year average and USD2.1/mmbtu higher than the 5-year highs. The severe dislocation in prices has been growing since the early May 2021 as the global economic recovery saw gas consumption rise globally and upstream production failed to keep pace. We are seeing the early signs of increased production from natural gas producers however the late August impacts from Hurricane Ida continue into see production shut-ins from the Gulf of Mexico. As of September 15 2021, 0.88bcf/d of natural gas production in the Gulf remains shut-in. We except the bulk of this output to be restored by the end of the month,” said the company.
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