Wood Mackenzie: Gas prices down 45% as 2024 market set to remain bearish

The report ‘Global Gas and LNG: 5 things to look out for in 2024’ states that high storage levels coupled with a mild Northern Hemisphere winter will see global prices remain relatively weak this year amid subdued global demand.

“[Wood Mackenzie] has been forecasting lower 2024 prices for much of last year, especially compared to forward curves, amid weak market fundamental expectations,” said Massimo Di Odoardo Vice President of Gas Research at Wood Mackenzie. “Global LNG supply growth will remain limited at 14 million t, but with Asian LNG demand still weak, competition for LNG is unlikely to heat up.”

European gas demand reduced by 7% in 2023, also because of mild weather. Normal weather dynamics and a possible economic rebound would support demand, however with renewable supply increasing by more than 100 TWh and nuclear production in France continuing to come back, European gas demand will remain flat at best.

The report anticipates a more positive view on gas demand in Asia, with expected growth of 12.5 million t, or 5% compared to 2023, but 2024 demand will still be almost 3 million t lower than levels in 2021.

With 60 LNG carriers due to be commissioned in 2024, the report also forecasts that the global LNG shipping market is at risk of oversupply.

“Altogether, the 60 new vessels equate to 10.4 million m3 of LNG shipping capacity, sufficient to move 54 million typ of LNG between the US Gulf Coast and Eu-rope,” Di Odoardo said. “There will be limited organic LNG supply growth and the bulk of US LNG it’s still expected to be routed to Europe, rather than Asia, limiting demand for shipping and putting pressure on freight rates.”

Portfolio players, the key LNG players that aggregate supply from across the world and sell to multiple customers, have been the major driver of LNG activity over the two past years according to the report. However, having signed 72 million tpy of long-term contracts in 2022 and 2023 and with most Qatari equity deals now finalised, the report states that portfolio players will likely feel comfortable with their positions and be more selective in building their portfolio further.

End-user activity is also expected to ease with Chinese buyers already signing less contracts after a hectic period in 2021 and 2022 where several deals were struck with sellers in the US and Qatar.

However, the report adds that some buyers might take a more opportunistic approach, with US independent players leveraging on low Henry Hub prices to seek more exposure to global LNG prices by taking long-term LNG capacity positions, or more activity emerging in price sensitive Asian markets if contracts prices fall further.

“[Wood Mackenzie’s] expectation is that overall contracting activity will soften in 2024 compared to the huge number of deals signed in 2021, 2022, and 2023,” Di Odoardo concluded.

Read the article online at: https://www.lngindustry.com/liquid-natural-gas/17012024/wood-mackenzie-gas-prices-down-45-as-2024-market-set-to-remain-bearish/