Gas and LNG prices to remain relatively low this year, Wood Mackenzie estimates

Global gas prices and liquefied natural gas (LNG) prices will remain relatively low this year. Demand will be dampened by high inventory levels in Europe and Asia, as well as a mild winter in the Northern Hemisphere. This was stated in an outlook by consultancy Wood Mackenzie.

„Global LNG supply growth will remain limited to 14 million tonnes. However, demand for LNG in Asia is still weak, and competition and rivalry for LNG are unlikely to increase,“ said Massimo Di Odoardo, vice president at Wood Mackenzie.

He is responsible for the company’s gas market research.

LNG prices fell by 58 percent last year to just below USD 12 (CZK 273) per million British thermal units (mmBtu). They continued to decline in the first two weeks of January, trading just above USD 10, their lowest level since last June.

In Europe, gas prices have fallen by 45 percent over the past three months to USD 10 per mmBtu. Wood Mackenzie expects sentiment in the gas market to remain tilted towards further declines for now.

Demand for gas in Europe fell by seven percent last year. The main reason was mild weather, which reduced consumption.

„Normal weather patterns and a potential economic recovery would support demand. However, given the increase in renewable electricity supply of more than 100 terawatt-hours and the continued recovery in nuclear generation in France, demand for gas in Europe will remain stable at best,“ Reuters quoted Wood Mackenzie as saying in its report.

In Asia, demand for LNG could rise by five percent this year, an increase of 12.5 million tonnes. It will nevertheless remain three million tonnes below its 2021 level. Demand rose by two percent last year. In China, the world’s largest LNG importer, LNG imports could increase by five percent this year.

Regarding LNG supply contracts, Di Odoardo expects activity to be more subdued this year than the huge number of contracts signed between 2021 and 2023. Wood Mackenzie expects major players to be more selective this year, having signed contracts for 72 million tonnes per year of supply in 2022 and 2023.

The United States is now supplying LNG to Europe and Asia. However, it is increasingly focusing on Europe, particularly because the region lost a large share of its Russian gas supplies after Russian troops invaded Ukraine two years ago. The European Union then began rejecting Russian gas even more strongly.

The report also noted that 60 LNG carriers are expected to enter service this year. The global LNG shipping market could therefore face an oversupply.