Global gas prices to rise amid tightening supply

Investing.com - According to a research note released on Monday, UBS analysts suggest that global gas prices are set to rise, driven by tightening supply and demand fundamentals.

Analysts have increased their gas price forecasts for Europe and Asia by approximately 9% on average for 2024, marking €33/MWh for TTF and $12/mmBtu for JKM, respectively.

Despite a muted recovery in global LNG demand, supply uncertainties have tightened market fundamentals. Unplanned outages in Australia and Norway, along with a reduction in US natural gas production, have raised concerns about supply ahead of the cooling season.

This has led to price increases to the mid-€30s/$12 range. Meanwhile, global LNG imports have remained stable year-on-year.

Looking ahead, UBS expects global LNG import growth to remain below the pre-crisis 5-year average of 7%, expanding by only 1% in 2024 and 5% in 2025.

This reduction in forecast numbers is attributed to a fragile market equilibrium due to limited spare capacity, which could lead to price volatility.

However, relief is expected from 2026 as new LNG capacity additions start to ease market tightness. Despite some project delays, a wave of new capacity is still expected to come online by 2026, which should start to ease market tightness.

UBS maintains its global LNG demand forecast over 2026-2030 as broadly unchanged, with lower European LNG requirement offset by higher Asian imports.

The research note also highlights the impact of recent supply disruptions. These disruptions have set a new price floor of around €30/$12. UBS anticipates near-term prices to trade in a narrow range around the low-€30s/$11 before rising back to the low-€40s/mid-$10s in Q4 2024 with higher seasonal demand.