Summary

Peak summer demand in Northeast Asia could be limited by a mild summer while consumption in Europe is expected to be weak over the coming months. North America is facing a supply glut, due in part to strong storage levels.

Forecast highlights

  • Asian spot LNG prices have come under pressure in recent weeks, falling below $7.2/MMBtu. Support for price increases through the remainder of the summer will be weak if the weather is mild as forecast.
  • Average LNG prices into Northeast Asia fell significantly in April, and further declines are expected before they start to level off as the brunt of the oil price collapse filters through.
  • The NBP day-ahead price is around 43 p/th, having come under pressure from ample supplies in the UK. Looking out to Q3, some support for European hub prices is expected as the region builds up storage for next winter.
  • The improving gas storage situation in the US and Canada will continue to pressure exchange-traded and regional gas prices in the two countries, with Henry Hub front-month futures struggling to move above $3/MMBtu.
  • Price volatility at the Transco Z6 pricing point in New York will remain low during the current injection season because of improved supplies from shale plays such as the Marcellus and Utica.
  • Spot LNG prices in Latin America are unlikely to move above $10/MMBtu in the coming months despite drought-driven demand from Brazil and Chile, and the onset of winter in the southern hemisphere.
  • Despite increased demand from consumers in the Middle East and Africa during summer, the regional market is unlikely to tighten in the coming months.
  • Brent North Sea crude oil futures are around $64.7/bbl. The rig count in the US has fallen significantly, although drops in production have been less dramatic. This and geopolitical tensions could provide support for further price gains in the coming months.