BAKU, Azerbaijan, September 15. Longer term gas supply crisis will help remove bottlenecks in LNG infrastructure, Fitch Ratings believes, Trend reports.
Fitch Ratings has increased its short- and medium-term gas price assumptions, primarily due to the European gas supply crisis, while adjusting short-term oil price assumptions in line with year-to-date (ytd) pricing and demand concerns.
“We have increased our European TTF and US Henry Hub gas price
assumptions for 2022-2025. Our European gas prices factor in no
supplies of Russian gas to the EU from now on. The margin for error
to balance the EU gas market this winter is small, and we expect
far higher gas prices, particularly in 2022-2023,” reads the latest
report from the rating agency.
Fitch analysts point out that lower demand and higher liquefied
natural gas (LNG) imports are vital for the avoidance of acute
shortages in Europe.
“Gas consumption fell in the EU by 11 percent yoy in 5M22. We estimate that demand destruction accelerated further during the summer due to the record-high spot prices. However, these higher prices in Europe have helped significantly increase LNG supplies to the region. The EU imported 75 billion cubic metres (bcm) of LNG in 8M22, up 62 percent yoy.
The EU has achieved its 80 percent gas storage use target two months ahead of 1 November. However, gas in storage covers only 20-25 percent of annual consumption, so the need for LNG supplies will continue in the medium term, which will support prices. In the longer term the gas supply crisis will help remove bottlenecks in LNG and pipeline infrastructure and accelerate the energy transition and energy savings initiatives in Europe. Our long-term gas price assumptions are therefore unchanged. However, the EU is working on a package of energy measures that are not reflected in our price assumptions and may affect European gas prices,” the reads the report.
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