Summary

Forecast highlights

  • Northeast Asian spot LNG prices have risen to around $6/MMBtu as seasonal demand has supported increased purchases. Reduced demand is expected to ease prices over the coming weeks.
  • The NBP month-ahead price was around 31-32 p/th in the middle of August. Ongoing seasonal maintenance is expected to hit flows to Europe and provide a floor to prices over the coming weeks. 
  • The Henry Hub front-month futures price will remain under pressure in September and October as gas stocks improve during the injection season. GGA expects the price to average $2.6/MMBtu during the two months.
  • Gas prices in California are likely to receive support as a result of ongoing maintenance at the Aliso Canyon storage facility. The facility suffered a major leak in October 2015, which was brought under control in February 2016.
  • A worsening glut in western Canada will keep the East-West gas price spread wide during the injection season. The spread has averaged $0.8/MMBtu so far in August 2016 compared with an average of $0.18/MMBtu in August 2015.
  • The average spot price for LNG in Latin America will come under additional pressure in the shoulder months. It is expected to remain below $8/MMBtu for the rest of 2016.
  • Qatar is expected to send more LNG cargoes to South Asia in the coming months because of the higher netbacks compared with either Northeast Asia or Southeast Asia.
  • Oil prices are expected to be rangebound at $40-50/bbl in Q3 2016. Rebalancing of the oil market will continue in Q4 2016, but there are demand-side concerns arising from the weakening economic situations in key oil-consuming countries. Prices will be volatile ahead of an informal meeting between OPEC and non-OPEC members in September.

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