The US Energy Information Administration reports that the global natural gas market may experience a tighter supply-demand balance this winter. They write:
The last two winters in the Northern Hemisphere were exceptionally mild, keeping global natural gas markets well supplied and balanced at relatively low prices. Prices going into this winter are only slightly higher than last year at the same time based on current forward natural gas and liquefied natural gas (LNG) prices in Europe and Asia. If weather remains mild this winter as in the past two winters, we expect a relatively stable global supply-demand balance with prices similar to the previous two winters. But if Europe and Asia experience colder temperatures this winter than in the past two years or other operational and market risks materialize, global supply-demand balances could tighten, leading to elevated natural gas prices and potential price spikes.
Several issues could affect global natural gas balances this winter:
- LNG supply growth. We expect limited LNG capacity additions to come online this winter, mostly in the United States.
- Shifts in pipeline flows. Less natural gas could be supplied by pipeline to Europe if the Russia-Ukraine natural gas transit contract set to expire at the end of 2024 is not renewed.
- Operational issues. There could be delays in the start-up of new projects, issues with availability of natural gas feedstock for exports, unplanned outages at LNG export facilities, and geopolitical events that could alter LNG trade flows, potentially reducing available supply.
- Below normal temperatures. A cold winter with sustained, lower-than-normal temperatures in one or more regions in the Northern Hemisphere could occur as El Niño changes to La Niña this year. This change in climate patterns may increase natural gas demand, creating competition for spot LNG supplies between Europe and Asia. Colder weather in the United States could reduce storage inventories and increase U.S. domestic Henry Hub prices, affecting LNG export prices from the United States. Other LNG import markets, including Brazil and Egypt, could also increase LNG demand, intensifying competition for spot LNG among regions, further tightening balances.
- Power generation. Issues related to electricity supply could affect demand for LNG as a fuel source for power generation, such as nuclear availability and restarts in Europe and Asia, renewable energy output, and fuel availability and costs to power stations, which affect dispatch economics. […]
China—the world’s largest LNG importer in 2023—imports LNG using long-term contracts and spot market arrangements. China’s regasification capacity is set to expand by 2.8 Bcf/d this winter, mostly in southern China, which is not directly affected by winter demand patterns.
This year, China’s LNG imports during low seasonal demand in September and October set all-time monthly records, which could indicate LNG stockpiling ahead of the upcoming winter. China increased its pipeline imports by 1.0 Bcf/d (15%) in January–September 2024 compared with the 2023 annual average.
This increase came mainly from Russia via the Power of Siberia 1 pipeline, which continues to ramp up to full production, with a target to reach 3.7 Bcf/d in export flows by 2025. Should China experience a colder-than-normal winter, it could substantially increase LNG imports, as was the case in the winter of 2017–18, further tightening the global supply-demand balance. If Europe also experiences a colder winter, buyers in Europe would have to compete for spot LNG cargoes, which in turn would raise prices at both European and Asian price hubs, especially if fuel switching is not possible.
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