Natural gas prices will keep surging, closing an era of cheap fuel prices and giving a way to a time for more costly energy; that transition will create unwanted effects on the global economy; specially on poorer countries; said Bloomberg in a report.
Firstly, during the last decade, natural gas prices were somewhat cheap, amid a boom in supply from the U.S. to Australia; that circumstance ended last year; when demand drastically outpaced new supply. Also, for this time of the year, liquified natural gas deliveries to Asia are reaching all-time highs.
Secondly, in the middle of this landscape, the world will depend more on cleaner burning gas, as a replacement to coal to help reach worldwide near-term climate goals. But as producers curb investments into new supply amid calls from climate-conscious investors and governments, it is becoming apparent that expensive energy is here to stay.
Thirdly, quoted by Bloomberg, Chris Weafer, chief executive officer of Moscow-based Macro-Advisory, said. “No matter how you look at it, gas will be the transition fuel for decades to come; as major economies are committed to reach carbon emission targets. The price of gas is more likely to stay elevated over the medium-term; and to rise over the longer-term.”
Moreover, demand is forecast to jump 7% by 2024, from pre-covid levels; according to the International Energy Agency. By 2035, appetite for liquefied natural gas is expected to grow by 3.4% a year; outpacing other fossil fuels, according to an analysis by McKinsey & Co.
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Natural gas prices to hold above $4 per MMBtu for 2022
In addition, according to Bloomberg, European natural gas rates have surged more than 1,000% from a record low in May 2020 due to the pandemic; while Asian LNG rates have jumped about six-fold in the last year. Even prices in the U.S., where the shale revolution has significantly boosted production of the fuel, have rallied to the highest level for this time of year in a decade.
Indeed, according to Reuters, Benchmark Dutch natural gas prices in northwest Europe have surged 80% in the past three months to all-time highs, while spot liquefied natural gas (LNG) in Asia is at an eight-year seasonal high.
Furthermore, James Huckstepp, EMEA gas analyst at S&P Global Platts, said. “Russia is now the only country with spare production; but in order to increase exports they would need to book additional capacity through Ukraine, and up to this point they have refrained.”
Finally, U.S. natural gas futures surged to a 31-month high this week; and the current futures market forward curve suggests prices will hold above $4 per MMBtu through March 2022.