Natural gas, coal prices to remain high in coming months

Oil&Gas 25 January 2022 18:29 (UTC +04:00)
Natural gas, coal prices to remain high in coming months

BAKU, Azerbaijan, Jan.25

By Leman Zeynalova – Trend:

Natural gas and coal prices will remain high in the coming months due to strong demand during the Northern Hemisphere winter and low stocks, Trend reports with reference to the UK-based Capital Economics.

However, the company sees the prices of all energy commodities falling back later in 2022.

“In the case of oil, we anticipate that the market will move into a surplus this year. On the supply side, OPEC should continue to raise output, even if they fall a little short of their current target, and we expect steady increases in US production. And on the demand side, growth in the US and China is likely to disappoint this year and we anticipate a slowdown in global oil consumption growth,” reads the latest report released by Capital Economics.

The company notes that after a stellar run in 2020-21, the prices of most commodities will fall back from their extreme highs this year.

“Driving this decline will be a further slowdown in demand growth, notably from key consumer China, and an easing of supply bottlenecks.We are also negative on the outlook for industrial metals. Underlying our relatively downbeat forecast for China is a view that the downturn in China’s metals intensive construction sector will deepen. Industrial metals prices were unusually resilient in 2021 despite softer Chinese demand as supply disruptions led to falling exchange stocks and spiralling energy prices raised the cost of production (and in some cases led to the suspension of production),” the report says.

However, the company expects port disruption to ease this year, energy prices to fall and for supply to improve, which should remove the prop to prices.

“We think industrial metals prices could fall particularly sharply when this happens, given the currently large gap between prices and their marginal cost of production,” the report reads.


Follow the author on Twitter: @Lyaman_Zeyn