International gas prices will not be curtailed to the same extent as oil, but they are estimated to reach lower averages than previously expected in 2020, according to Rystad Energy. The energy research group lowered its natural gas forecast, based on the weaker demand seen globally throughout the year as a result of lower commercial and industrial activity.
Europe (TTF) natural gas is forecast at $3.2/MMBtu for 2020, down by $0.62/MMBtu from its February forecast. Similarly, Asian spot prices were revised down to $3.80/MMBtu. Prices in 2021 and 2022 were also revised down on lower economic growth and ample LNG supplies. For the US, Henry Hub gas prices will remain below $2.5/ MMBtu for a protracted period, averaging $1.94/MMBtu in 2020 and $2.43/MMBtu in 2021.
“As the epicenter of Covid-19 moves from Europe to the US, we could see a drop in gas demand from power and other sectors, adding more downward pressure for Henry Hub prices” said Rystad’s head of gas and power markets, Carlos Torres-Diaz.
Rystad expects global market fundamentals to remain loose through 2022 before prices tighten as LNG demand growth exceeds liquefaction capacity due to delays in project sanctioning. A tight LNG balance in 2024 and 2025 is also expected along with a price spike.
“Much of the demand losses this year come from limited appetite for LNG, with buyers scaling down orders amid reduced industrial and commercial activity and oversupply, as low prices sometimes make shipping uneconomical,” the company said.
Downward risk is expected later in 2026 and 2027 due to potential overinvestment in 2019 as new supplies begin coming onto the market. But, Rystad noted the downside in prices during that period is more limited than its previous estimate as the lower number of liquefaction projects moving ahead will help maintain a better market balance.
LNG production and exports have already been adjusted due to weak demand and lower prices. After peaking at 9,502 MMcf/D on 31 January, US feedgas dropped to an average of 7,900 MMcf/D in March. US gross natural gas production is expected to drop from 116 Bcf/D in Q4 2019 to about 108–109 Bcf/D in the same period this year.