Summary
Forecast highlights
- Spot prices in Northeast Asia picked up to around $5.3/MMBtu in mid-July. Although further rises could be seen as support from the summer weather continues, additional gains are expected to be limited.
- NBP prices for the coming winter are expected to rise, and jumps for peak winter prices have been seen on the forward curve as Rough has unexpectedly shut for an extended period. The NBP month-ahead was around 33-34 p/th in mid-July.
- The Henry Hub front-month futures price has limited upside between September and November despite rising gas consumption. GGA expects the price to peak around $3.1/MMBtu towards the end of the shoulder months, compared with a peak of $2.79/MMBtu during the same period last year.
- Spot LNG prices in Latin America will remain under pressure in the coming months as demand for the fuel fades in key regional markets. The region’s average spot price is expected to remain below $8/MMBtu for the rest of 2016.
- The premium of the PG&E Citygate price in California over the Henry Hub spot price is expected to remain low in the coming months as drought conditions in the state ease. Meanwhile, spot gas prices in western Canada will remain under pressure from weakening gas demand and improving gas stocks.
- The Middle East, Africa and South Asia will remain attractive destinations for LNG shipments from Qatar as netbacks from these locations are higher than other regions.
- The Brent crude front-month futures price is expected to remain below $55/bbl for the rest of 2016 as supply/demand fundamentals remain finely balanced. While the economic implications of Brexit remain bearish for prices, the global oil market will continue to rebalance, helped by reduced US oil output. Consequently, GGA expects Brent to average $44.5/bbl in 2016, down from its previous forecast of $46.1/bbl.