Gas prices have seen a new lull in global markets since the beginning of the year, but “it wouldn’t take much to cause a strong rebound,” according to the quarterly study by the specialist research center Oxford Institute for Energy Studies, released Monday.
“Even a relatively small rebound in demand in Europe or Asia to take advantage of low prices, a cold winter, or a supply disruption such as in 2022 at the Freeport liquefaction terminal (in Texas, editor’s note) could easily disrupt the current balance,” the authors point out.
“It is too early to be confident that the signals are necessarily pointing in a good direction for all of 2023,” they add. They point out that natural gas prices on the markets, which indirectly influence the final consumer tariff, remain “well above the average level of the last five years”. Natural gas prices are measured against two benchmarks, the Rotterdam Title Transfer Facility (TTF) and the Japan Korea Marker (JKM) liquefied natural gas price in Asia. These prices, which had already eased considerably in January, have fallen further since then, being down “about 33%” since January for TFF and “almost 25%” for JKM.
The Oxford Institute for Energy Studies offers several explanations: first, Europe ended the winter with a “record level of storage for a first quarter”. The European Commission’s objective of having 90% of stocks filled by November 1 therefore seems plausible.
Secondly, gas consumption in Europe remains lower than last year (-13% in Q1 compared to Q1 2022). In addition, global liquefied natural gas(LNG) supply is “slightly increasing” compared to 2022, while quarterly LNG imports are contracting outside Europe. “One of the big questions is how the lifting of Covid-related restrictions in China will impact energy markets,” the authors note for the rest of the year, however.
Among the factors that could derail prices again, they cite the risk of a further reduction in exports from Russia, if the Russian flow via Ukraine is interrupted or if Europe takes stronger measures against Russian LNG imports. The study points out that ten European companies have long-term contracts with the Russian giant Gazprom, which they have agreed to pay for in rubles: OMV in Austria, PPD in Croatia, SPP in Slovakia, MVM in Hungary, DEPA, Mytilineos and PPC in Greece, Makpetrol in northern Macedonia, Srbijagaz in Serbia and Energoinvest in Bosnia.
