Summary

Bearish fundamentals are keeping prices under pressure as Europe, North America and Northeast Asia head towards the peak of the winter demand season. Prices rises in all three regions are expected to be limited this winter.

Forecast highlights

  • Spot LNG prices in Asia remain under pressure and were down to around $7.5/MMBtu by the middle of December. Weak demand for additional LNG cargoes will limit support for prices over the winter period. 
  • European hub prices look unlikely to see gains over the coming weeks. The NBP month-ahead fell to around 35-36 p/th in mid-December and could see pressure from bearish fundamentals through the end of the year and into Q1 2016. 
  • Relatively mild weather in Europe has limited gas withdrawals. Consequently, the region will enter 2016 with strong levels of gas in store. This will make price spikes unlikely in Q1 2016, even if there are cold snaps.
  • Forecasts for a mild winter will cap gains in the Henry Hub front-month futures price. GGA expects the price to average $2.6/MMBtu during the winter. The price could recover in H2 2016 as weak oil prices dampen growth in US gas production.
  • There will be limited upside for spot LNG prices in Latin America in coming months. Weak demand in Brazil and Mexico is expected to persist and the start of US LNG exports from Sabine Pass in January 2016 will hit a glutted market.
  • Spot gas prices in California are expected to receive support in the next few months from the ongoing drought. However, spot prices at most pricing points in the US and Canada will remain under pressure from mild weather and healthy storage.
  • Low global LNG prices will add to the difficulties Equatorial Guinea and Nigeria face in shipping incremental volumes to Asian and European markets. Latin America will be an attractive destination, provided demand lasts.
  • Oil prices are expected to remain under pressure in H1 2016 as the market is unlikely to rebalance before H2 2016. The weakening economies of several key consumers and forecasts for lacklustre demand next year will further weigh on prices.