Page 6 - FSUOGM Week 48 2022

FSUOGM COMMENTARY FSUOGM

ING natural gas price forecasts. Source: ING research

gas exchanges and also reduce transparency in prices is more bearish. US dry gas production is
these markets. It appears as though the Com- expected to hit record levels next year, growing
mission will set this cap well above the market, by a little more than 1.6 bcf per day to average
which suggests that they only want to cap prices almost 99.7 bcf per day over 2023, whilst fin-
in an extreme situation, where high prices (sim- ishing 2023 with output in excess of 100 bcf per
ilar to levels seen in August) are sustained. Fur- day. In addition, this year saw stronger demand
thermore, the longer-term goal of setting up a from the power sector over the summer, which
new benchmark is not going to solve the issue of pushed overall gas demand higher this year.
bottlenecks in European gas infrastructure. TTF Expectations are that domestic demand will fall
is trading at a premium to LNG prices because back towards more normal levels. Meanwhile,
of the bottlenecks in LNG regasification capacity on the export side, whilst there is more LNG ca-
and pipeline infrastructure. At the end of the day, pacity set to start up over the course of the year,
the only viable long-term solution for Europe is this is fairly limited. LNG exports are expected
increasing supply and removing some of the bot- to average a little over 12.3 bcf per day in 2023,
tlenecks facing the industry. up from an estimated 10.8 bcf per day in 2022.
As a result, over the course of 2023, we
US natural gas market more comfortable should see US natural gas inventories moving
The US natural gas market this year has also from below their five-year average to above it
seen significant strength, trading to multi-year ahead of the next heating season. In fact, the US
highs. Strong global LNG prices, stronger de- could go into the 2023/24 winter with storage
mand from the power sector and below-av- at its highest levels since 2020. Therefore, we
erage inventories have all proved bullish for expect Henry Hub to trade lower in 2023 rela-
Henry Hub. However, the outlook for US gas tive to 2022. ™

P6 www. NEWSBASE .com Week 48 02•December•2022