Summary

The peak of winter has failed to lift gas markets in the Northern Hemisphere. Bearish fundamentals in Northeast Asia, Europe and North America continue to weigh on prices.

Forecast highlights

  • Spot LNG prices in Asia have come under increased pressure and have dropped to around $6.5/MMBtu. Prices are expected to fall further over the coming weeks as bearish fundamentals look unlikely to ease.
  • The falling price of oil will weigh on oil-indexed LNG prices over the coming months. Prices in long-term contracts with oil links had started to stabilise in recent months, but further falls will be seen in the spring and summer.
  • Colder temperatures have provided a low floor to European hub prices, a situation that could continue into February. Strong supply and ample storage volumes will keep pressure on hub prices over the rest of the winter.
  • Forecasts for a mild winter in the US will limit gains in the Henry Hub front-month futures price, which is likely to fall once the 2016 gas injection season gets under way in April. GGA expects the price to average $2.8/MMBtu in 2016.
  • Spot LNG prices in Latin America are expected to remain below $10/MMBtu in H1 2016 as demand from key consumers continues to wane. This will intensify efforts by regional LNG suppliers to find customers in other regions.
  • The East-West gas spread in Canada (the difference between the Dawn and AECO hub prices) is expected to remain narrow on an annual basis in the coming months because of healthy gas storage levels. 
  • Weak oil prices will continue to weigh on gas and LNG export prices from Qatar in 2016. Qatar’s average export price for gas and LNG was around $7/MMBtu in Q3 2015. Weakening LNG prices will continue to benefit LNG consumers in the region.
  • Oil prices are expected to remain under pressure in 2016 despite some rebalancing of the market in H2. The weakening economies of key consuming countries, the strong dollar and additional supplies will cap potential gains.