Baku, Azerbaijan, April 29
By Leman Zeynalova – Trend:
Over the next two years prices are expected to recover from their current lows as demand picks up but remain below 2018 averages, the World Bank (WB) said in its Commodity Markets Outlook, Trend reports.
“Further ahead, the increase in LNG capacity is set to alter the composition of natural gas markets, which have historically seen prices linked to oil prices. Reflecting these developments, long-term forecasts for natural gas prices have been revised down, from $8/mmbtu to $7/mmbtu in Europe, and from $10/mmbtu to $8.5/mmbtu in Japan. The expansion of long-distance gas trade via LNG tankers will cause the price differentials between different locations to shrink,” the report reads.
WB estimates that Natural gas prices have declined sharply since the start of the year, with the wedge between the three main spot prices narrowing dramatically.
“U.S. prices temporarily surged at the end of 2018, rising more than 50 percent to $4.6/mmbtu in November, before dropping below $3/mmbtu at the start of January 2019. The spike in prices was triggered by expectations of a colder-than-average winter, which was exacerbated by low inventories. Spot prices in Europe and Asia, which had risen in the second half of 2018, plunged in March,” said the report.
The fall was triggered by weaker demand due to mild weather and the restarting of nuclear power plants in Japan, as well as greater availability of liquefied natural gas (LNG). Global exports of LNG have been rising steadily, according to the World Bank.
The report shows that exports from the United States rose 50 percent to 3 bcf/d in 2018 and are expected to double to 6.1 bcf/d by the end of 2019.
“Surging production of natural gas in the U.S. has facilitated an increase in LNG exports, despite a 10 percent jump in U.S. natural gas consumption in 2018. LNG export capacity in Australia and Qatar has also increased substantially and is set to grow further.”
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