Quarterly Gas Review – Issue 22
In this third edition of the Gas Quarterly for 2023 we once again review the series of signposts that we outlined as key indicators of the global gas market during the year and also draw some conclusions about the outlook for prices and the supply-demand balance.
In summary, we conclude that gas prices in Europe and Asia of $10-12/MMBtu in recent months reflect a relatively benign current market state, influenced by the continuing impact of warm weather, a modest recovery in Asian LNG demand, the continued availability of Russian pipeline gas and LNG, albeit at low levels, and European storage stocks that ended Q2 2023 around 20 Bcm high year-on-year. These positive factors have been tempered by curtailments in Norwegian pipeline supply due to maintenance and global LNG supply (as measured when regasified at LNG import terminals) not growing as quickly in the year-to-date as previously anticipated.
Looking ahead, while the rate of year-on-year growth in LNG supply may pick up, we could also see Chinese LNG imports begin to rise (as they had begun to do so in June). In Europe, the current high storage stocks mean that even with injection rates lower than last year, we could still see storage being full before the start of the winter heating season, putting downward pressure on prices in late summer.
Despite this relatively benign recent history and rest-of-summer outlook, the European market remains tight, with prices reacting to news that impacts expectations of supply. Looking ahead to winter, any surge in demand or unplanned curtailment of supply is likely to result in a sharp price reaction. As such, volatility is likely to remain the main feature of the market during the rest of 2023.
In addition to this market analysis, we include an essay on another interesting dynamic in the global LNG market, namely imports to South America. Ieda Gomes, a Senior Visiting Research Fellow at OIES, reviews the supply and demand balances in Brazil, Argentina and Chile over the past few years and highlights the dramatic swings in LNG imports that have been mainly caused by hydro availability but which have also resulted from the changing fortunes of gas production from the Vaca Muerta field in Argentina and from the gradual decline in gas supply from Bolivia. This latter trend could lead to more LNG imports in the short term, but increased indigenous supply in Argentina and Brazil, plus the completion of key pipeline infrastructure, could ease pressure in the medium term.