Outlook on Natural Gas prices from HSBC

According to HSBC, a new equilibrium in the European gas market is nearing.

Over the past several weeks, petrol prices have exceeded expectations; the Title Transfer Facility (TTF) benchmark has surpassed USD 10/mBtu, reaching its highest level since January. The bank claims that supply disruptions—like the protracted Gorgon maintenance and Freeport LNG outage—along with geopolitical uncertainties are to blame for this rise.

Analysts point out that despite these problems, European stocks remain well-stocked, being at 64% capacity at the moment as opposed to a historical average of 43%. Gas demand is still low, and non-gas power generation is strong, so if global tensions decrease, there may not be much of a drop in gas prices. HSBC's projection for the summer of 2024 is still USD 9/mBtu.

The experts at the bank said: "Europe's gas market is well on its way to finding a new normal, two years after Russia's invasion of Ukraine."

Nevertheless, it is anticipated that the winter of 2024–2025 will be the final difficult time for Europe before fresh LNG supplies, mostly from the US and Qatar, come online between 2025 and 2028.

An excess of LNG is expected to enter the market in 2026 and could continue until the end of the decade as a result of this flood. The exact date of this excess is unknown, but given the steady supply expansion from major suppliers, HSBC believes it is quite likely.

Long-term market rebalancing is anticipated, with lower flexible US exports and more LNG demand from price-sensitive Asian nations. Summertime prices may decline as a result, possibly reaching US LNG cash costs of $5–$6/mBtu.

(Sources: investing.com, reuters.com)