Fitch’s pessimistic natural gas price forecast
Natural gas prices in Europe are only projected to sustainably normalize by 2025 with the establishment of liquefied natural gas (LNG) and interconnected infrastructure.
According to the Fitch Ratings report titled “The worst of the gas crisis in Europe is over”, the supply of liquefied natural gas (LNG) and interconnected infrastructure stand out as the key criteria for long-term gas supply in Europe. .
Increased LNG supplies in Europe, mild weather conditions and measures to reduce demand averted the worst case scenario in the energy crisis.
DEMAND DECREASES FOR RECORD PRICES
Relying on record gas prices, European Union (EU) gas demand declined by 10 percent in 2022, while the decline in demand is expected to continue this year and reach 15 percent. Decreased demand due to high prices varies from country to country.
LNG, which is the main alternative source to reduce reliance on Russian gas in the energy crisis, is expected to maintain its importance and supply shortages in the global LNG market continue.
Although the demand for LNG is predicted to increase with the abolition of China’s “zero Kovid” policy and this situation will increase the shortage in global LNG supply, it is estimated that Europe will be able to provide a sufficient purchase of LNG.
‘WE WILL CONTINUE TO FEEL MORE FLEXIBLE FOR A WHILE’
Fitch Ratings predicts that natural gas prices in Europe will remain “very volatile” for some time and remain at higher than pre-war levels.
In this context, natural gas prices will only sustainably normalize by 2025, with the creation of LNG and interconnected infrastructure.
On TTF, the Netherlands-based virtual natural gas trading point with the deepest depth in Europe, the price of a megawatt-hour of natural gas is trading at €58 in contracts with an expiration date of March 2023.
Prices rose to €342.8 per megawatt-hour in August 2022 after the war.
Prices in TTF had entered a downward trend as of December 2022 due to benign weather conditions and high occupancy rates in natural gas storage facilities. (AA)