Commodities Buzz: Tight supply-demand balance could elevate natural gas prices says EIA

Global natural gas market may experience a tighter supply-demand balance this winter, according to a latest update from the Energy Information Administration or EIA. The last two winters in the Northern Hemisphere were exceptionally mild, keeping global natural gas markets well supplied and balanced at relatively low prices. Prices going into this winter are only slightly higher than last year at the same time based on current forward natural gas and liquefied natural gas (LNG) prices in Europe and Asia. If weather remains mild this winter as in the past two winters, EIA expects a relatively stable global supply-demand balance with prices similar to the previous two winters. But if Europe and Asia experience colder temperatures this winter than in the past two years or other operational and market risks materialize, global supply-demand balances could tighten, leading to elevated natural gas prices and potential price spikes.

EIA noted that a cold winter with sustained, lower-than-normal temperatures in one or more regions in the Northern Hemisphere could occur as El Niño changes to La Nina this year. This change in climate patterns may increase natural gas demand, creating competition for spot LNG supplies between Europe and Asia. Colder weather in the United States could reduce storage inventories and increase U.S. domestic Henry Hub prices, affecting LNG export prices from the United States. Other LNG import markets, including Brazil and Egypt, could also increase LNG demand, intensifying competition for spot LNG among regions, further tightening balances.

Powered by Commodity Insights