BAKU, Azerbaijan, Oct.6
By Leman Zeynalova – Trend:
Current high gas prices are expected to linger into Q1 2022, while expectations around improving supply availability are weighing on H2 2022 prices, Trend reports with reference to the International Energy Agency (IEA).
“Forward curves as of end of September suggest an expectation of Henry Hub rising by 5 percent, TTF by 10 percent and Asian spot LNG prices by 6 percent in 2022 above this year’s levels. Prices are expected to moderate after the end of the heating season. During the second half of 2022 Henry Hub prices are expected to average 18 percent below H2 2021 levels, with both TTF and Asian spot LNG almost 40% below. Based on current forward curves, oil-indexed LNG contracts are set to retain a discount during 2022. Regional price spreads between Asian spot LNG and Henry Hub, and TTF and Henry Hub, are expected to tighten to USD 12.5 and USD 11/MBtu respectively, incentivising growth in inter-basin LNG trade,” reads the latest IEA report.
Tighter than expected supply, continued demand recovery in Asia and strong storage injections in Europe all contributed to the soaring spot prices seen in Q3 2021 In the United States, Henry Hub more than doubled compared to last year and reached an average of USD 4.3/MBtu – its highest Q3 level since 2008.
While production returned to growth and domestic consumption remained below last year’s level in Q3, the strong growth in pipeline and LNG exports resulted in a tight summer market. Forward curves as of end of September suggest Q4 prices averaging USD 5/MBtu.
“This would translate into an annual average of USD 4/MBtu – its highest since 2010. In Europe, TTF prices rose sixfold compared to last year to an average of USD 16/MBtu – the highest quarterly average since the Dutch hub was set up in 2003. The strong rise in gas prices was driven by the combination of tighter than expected supply and a strong increase in regulation driven storage injections (up by more than 76% y-o-y). Forward curves suggest TTF prices averaging USD 24/MBtu during Q4, translating into an average of USD 14/MBtu in 2021 – its highest level on record. Asian spot LNG prices soared fivefold to an average of USD 17.5/MBtu in Q3, with September trading at USD 22/MBtu – the highest level for this month in our records. Strong demand growth in key Asian markets, together with stiff competition for additional cargoes (with Europe and Latin America) and unplanned outages, provided upward pressure on spot prices,” says the IEA.
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