Gas prices to ease, but to remain elevated in Europe

Oil&Gas Materials 22 October 2021 11:56 (UTC +04:00)
Gas prices to ease, but to remain elevated in Europe

BAKU, Azerbaijan, Oct.22

By Leman Zeynalova – Trend:

Gas prices will ease, but remain elevated in Europe, given the mild start so far to the heating season and improved power generation from renewables, Trend reports with reference to Fitch Solutions.

“However, the risk of price volatility remains high given the shortages in coal and natural gas, in Asia especially, with both remaining key factors in energy prices with extreme cold likely to push consumption higher and forcing prices higher to ration supply. Our view remains that prices will remain elevated across the Winter season before easing through the Spring should weather conditions remain broadly normal.

UK NPB prices are down to GBp235/therm, from a high of GBp276/therm on October 6th, a decline of 15 percent. Dutch TTF prices are down 22 percent to EUR91.25/MWh from a high of EUR117/MWh. In the US, Henry Hub prices are down 20 percent early October highs while Newcastle Coal futures are down 15 percent from earlier highs. However, coal and natural gas prices across the board are well above annual lows in 2021 with Asia LNG posting a 500 percent increase, European gas at a 480 percent increase, Henry Hub at 108 percent higher and coal at 189 percent over its low. Given the energy price increases have stemmed from a fundamental mismatch between supply and demand we expect prices to remain elevated although the rapid run-up in prices will see consumption fall as price sensitive consumers reduce their energy consumption,” reads a report released by Fitch Solutions.

LNG imports into Europe remain a key barometer of global gas trade and so far little additional inventory has been received with volumes near the 5 year averages, according to the company.

“Typically, over the last 5 years volumes increase early November with the bulk of deliveries on long-term contracts over spot purchases. Given the high price of Asian landed LNG cargoes, and the lack of sufficient prices arbitrage to cover transport we don’t expect LNG to Europe to outpace historic levels. The prospect of insufficient LNG supplies to Europe this Winter will add more price upside to weather events with the bulk of extra supply likely to mostly come from Russia whose recent comments have seen prices ebb on talk of additional supplies this Winter. However, political conflicts over the final approvals for the Nord Stream 2 gas pipeline could see delays to increased piped gas from Russia.”


Follow the author on Twitter: @Lyaman_Zeyn