Natural Gas Industry: Global Gas price Outlook in 2022

Global natural gas supply demand patterns

On the supply side, the United States Russia are the world's top two natural gas producers, with output of 914.6 billion cubic meters 638.5 billion cubic meters respectively in 2020, accounting for 40.3% in total. The US is also the third largest LNG exporter in the world with a natural gas production CAGR of 3.1% 2000 to 2019, with a LNG export CAGR of 97.7% 2016 to 2020. More than 70 percent of Russia's pipeline gas goes to Europe. On the demand side, the United States Europe are the world's top two consumption areas, with consumption of 832 billion m3 541.1 billion m3 respectively in 2020, accounting for 36% in total. Natural gas will account for 34 percent of the energy consumption mix in the U.S. 25 percent in Europe in 2020. The electric power sector is the largest source of demand for natural gas in the United States, accounting for 38.1% of total consumption. Gas demand in the EU is concentrated in residential industrial areas, about 40 percent of it comes Russia.

Global gas pricing system

At present, the world can be divided into three major natural gas markets: North America, Europe Asia Pacific. Henley hub price is the benchmark price for north American natural gas trading. TTF in the Netherlands is the only benchmark hub in continental Europe; The increasing liquidity of spot trading in Asia has made the JKM price Index a benchmark for Asian spot market prices. The three major price indices have all risen rapidly since 2021, with HH, TTF JKM prices rising 135%, 340.9% 119.7% respectively the beginning of the year to mid-November.

Natural gas price increase factor analysis

In the short term: on the demand side, the low temperature at the beginning of the year led to the proportion of LNG in the total domestic natural gas imports reaching 72.4%; The combination of extreme weather lack of wind contributed to an 11.5% year-on-year increase in gas consumption in the EU region in the first half. On the supply side, production recovery in the United States is limited, while output in Russia has increased significantly. January to August this year, us natural gas production reached 689.03 billion cubic meters, up 0.5% year on year. LNG exports hit a new high, up 42% year on year; Russia produced 625.73 billion cubic meters of natural gas in the first 10 months of this year, up 11.2 percent year-on-year. In addition, weak spot prices in Europe limited supply growth in Russia further exacerbate the tight supply pattern in Europe. According to IEA data, we forecast that the global natural gas supply demand gap in 2021 will be about 6 billion cubic meters. In the short term, supply demand mismatch, the overall supply demand of the market is tight.

In the medium long term, in the context of post-epidemic economic recovery global carbon neutrality, the relatively rapid shift in end demand oil coal to natural gas has given rise to relatively high demand growth expectations; In addition, extreme weather may become a long-term disturbance of natural gas demand, resulting in local gas shortage. The slowdown in upstream capital expenditure on the supply side is a general trend that suggests it will be difficult to return to the previous easy supply environment gas supply demand will remain tight balance for a long time.

Natural gas price trend judgment

In terms of demand, international natural gas prices are expected to fall under the background of weakening extreme weather disturbance factors, slowing regional demand represented by Europe gradual recovery of PRODUCTION in the United States. On the supply side, the momentum of new LNG liquefaction capacity in the United States is strong. As of February, there were 137 million tons of LNG projects under construction approved, 25.6% of which were in North America. We expect the future capacity expansion of LNG giants represented by the United States to increase the flexibility of supply in the global LNG market alleviate the supply demand mismatch caused by contingencies in the short term.

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Source: Tianfeng card volume

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