Usually, these summer months are a natural lull for natural gas markets. If you take out the strong energy crunch gains from 2020 and 2021 you can see the normal pattern of summer falls in natural gas prices. The average return for gas prices is a fall of -10.39% over the last 22 years between June 15 and September 01.
However, not all seasonal patterns are always worth following and this is a good example.
Global demand set to outstrip supply
Global demand is expected to be at 436 million tons in 2022, but there is only 410 million tons of available supply. The expectations are that the new rush for natural gas projects will not come online now until 2024. So, there is a capacity issue. Furthermore, as the world turns away from the Russia’s gas supply this gap is only expected to get worse.
Once, and if China, returns to full activity the demand for natural gas is expected to pick back up again. The lack of capacity to meet demand is setting the stage for a price scramble at some point later this year as we head towards the winter months.
Gas experts concur
Bloomberg reports that this view is echoed by gas experts. The Asia-Pacific head of gas and LNG research at Wood Mackenzie, Valery Chow, said to Bloomberg that the ‘market will tighten going into winter as European and North Asian buyers compete for volumes’.
The risks to higher natural gas prices
The main risk to this outlook would be a de-escalation between Russia/Ukraine which would bring more natural gas supply back into the market.