• 6 days Retail On Pace For Most Bankruptcies And Store Closures Ever In One Year: BDO
  • 10 minutes America Could Go Fully Electric Right Now
  • 53 mins Majors Oil COs diversify into Renewables ? What synergies forget have with Solar Panels and Wind Tirbines ? None !
  • 10 hours OP Kennedy article : "Trump blasts Biden Fracking Plan . . . "
  • 15 hours America's Frontline Doctors - Safely Start Living Again!
  • 20 hours France Sees 10.6% EV Market Share In September — 4× Growth Year On Year
  • 20 hours Conoco Pledges ‘Net-Zero’ Emissions in Break With U.S. Rivals
  • 16 hours Vote Biden for Higher Oil Prices
  • 2 days Something wicked this way comes
  • 2 days Permian in for Prosperous and Bright Future
  • 16 hours Tesla Model 3 Is September's Top Selling Car of All Vehicles in Switzerland
  • 1 hour Clean Energy Is Canceling Gas Plants
  • 3 hours "COVID Kills Another Oil Rally" by Tom Kool 10/16/2020
  • 21 hours TX NATGAS flaring
  • 1 day GPOR - Gulfport Oil - Why?
  • 1 day covid. stop the carriers and thus stop the virus.
  • 2 days A sneak peak into the US election
  • 3 days California’s Electric Vehicle Dream Has A Major Problem: No
Oil Markets Are In For A Second Round Of Trouble

Oil Markets Are In For A Second Round Of Trouble

New lockdown measures and curfews…

Oil Prices Aren’t Going Anywhere Until The Election

Oil Prices Aren’t Going Anywhere Until The Election

Oil prices are almost certainly…

Has The Gold Rally Run Out Of Steam?

Has The Gold Rally Run Out Of Steam?

Gold has had a tremendous…

Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

More Info

Premium Content

There’s More Upside For Natural Gas Prices

With winter around the corner, the outlook for natural gas demand just got a boost. Forecasts, for now, seem to point to a normal winter, meaning a rise in gas demand for power generation and heating. But will prices follow? They are already improving in Asia, not least because weather forecasts suggest a colder than usual winter. The spot price for natural gas in Northeast Asia has recovered from the record lows reached earlier this year amid the pandemic and currently hovers around $5.20 per million British thermal units, similar to pre-pandemic levels although still lower than the average of $6 per mmBtu gas traded at this time last year in Northeast Asia.

The news from China specifically is also good: imports of liquefied natural gas this year are seen up 10 percent this year from last as local industries snap up cheap cargos while the oversupply lasts. Business activity in Asia’s hothouse is improving and consumer demand appears to be strengthening too post-pandemic, which will drive greater demand for LNG. Total gas demand, however, is likely to be weaker than some might hope: a recent government report forecast gas demand growth this year at 4.2 percent. This would be the slowest rate of growth for the last five years.

In India, the picture is perhaps a little more optimistic. The country’s largest gas processing and distribution company, GAIL, said that local demand for gas had recovered to pre-pandemic levels, which prompted the company to reopen its gas import facility in the western part of the country, where cases of Covid-19 are still rising. India satisfies about half of its gas demand from imports.

Related: Can Kuwait’s New Ruler Reform The Country?

Gas demand in Europe is also picking up and with it, prices. Between May, when they hit a trough, and last month, spot prices for natural gas at the Title Transfer Facility rose by 265 percent to over $3.60 per mmBtu, the Wall Street Journal reported in mid-September citing S&P Global data. Excessive stocks have dwindled, which bodes well for LNG exporters ahead of the winter season.  On the flip side, if Covid-19 cases continue to surge in Europe, movement restrictions would be tightened further, which would likely affect gas demand even during peak demand season. In the summer, Europe canceled a lot of LNG cargoes amid a slump in demand, and pipeline imports from Russia also fell substantially because of the devastation that the pandemic wreaked on demand. Storage facilities filled up in the low season, making Europe unable to absorb excessive stocks elsewhere as it has traditionally done. It is doubtful whether we will see a repeat of that situation thanks to the seasonal factor, but natural gas’s good fortunes in Europe are not exactly guaranteed, either.

Related: Energy Storage Market To See Explosive Growth This Decade

Supply, meanwhile, has been shrinking not just because of the improving demand that has helped draw down inventories, but also thanks to a couple of outages in Australia, which last year took the crown of largest LNG exporter by capacity from Qatar. Shell’s Prelude LNG project has been offline since the start of the year and the company only last month began preparations to restart production. Prelude has an annual capacity of 3.6 million tons of LNG. Chevron, operator of the 15.6-million-ton Gorgon project, will be shutting down all three trains gradually after it detected damage in a key component of the liquefaction equipment.

Supply has also declined in the United States, where a lot of natural gas is extracted as a by-product of oil drilling in the shale patch. Last year, this became a problem, especially in the Permian where a shortage of pipeline capacity to take away the gas pressured prices. This year, when shale drillers started shutting in oil wells in response to the price slump, gas production also fell, eventually reducing the gap between supply and demand and stimulating prices.

For now, gas fundamentals look good for sellers and also good for buyers. It would only be a matter of time for this to change but with winter coming, unless the weather cheats again remaining milder than usual, gas prices may be in for a further rally.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News