Quarterly Gas Review – Issue 21
In this latest edition of the Gas Quarterly we review the first quarter of 2023 against the signposts that we outlined at the start of the year. The overarching theme is that the outturn for Europe has been much more benign than could have been expected at the start of winter. A combination of warm weather, aggressive demand response to high gas prices and changing consumer behaviour, as well as the increased availability of LNG to Europe, have led to a situation where the market seems well balanced. However, although prices have fallen sharply from their 2022 highs, they still remain well above the 5-year average level, underlining the point that although the outlook for 2023 looks relatively calm it would not take much of a shift in supply or demand to cause a sharp rebound.
In this Quarterly we also look at one of the big questions in the global gas market, namely how the unwinding of the COVID lockdown in China would impact energy markets. With the economy now fully re-opened, it is expected that growth will resume and with it energy demand growth, including demand for pipeline gas and LNG imports. Much depends on what route to growth the Chinese leadership decides to take, and also on the policy concerning energy security, which tends to favour gas over coal. In addition, the drive to increase domestic gas production and to optimise imports via pipeline means that the need for spot LNG purchases could be minimal in 2023, albeit that LNG supply under long-term contracts is set to grow. As a result, a low level of competition with Europe over spare LNG cargoes again points to a benign scenario for gas prices this year.