The Global gas markets are transitioning from a very oversupplied couple of years to a progressively tighter period, according to a report Wednesday by Goldma Sachs.
The report said “although near-term global gas prices have run ahead of fundamentals for now on transient LNG supply issues, we believe this fundamental tightness that has started to show is here to stay for the next few years.
“Accordingly, though we are bearish vs current forwards near-term, we expect TTF and JKM to price well above market forwards in 2022.
“Specifically, the ongoing global gas rebalancing will, in our view, create room in Europe for higher pipeline and LNG supplies. This means TTF can balance the market by pricing increasingly higher against coal, instead of pricing supply out at sub-$4 levels. And with coal prices particularly well supported, we see TTF pricing at higher levels than we previously expected. Hence, we raise our 2020/21 winter and 2021 summer TTF forecasts to $5.70/mmBtu and $5.25/mmBtu and JKM to $7.40/mmBtu and $6.05/mmBtu.
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“As the global gas rebalancing evolves, we expect tighter European gas and LNG markets to further support TTF and JKM, particularly from 2022. Accordingly, we introduce our 2021/22 winter, 2022 summer and 2022/23 winter TTF forecasts at $5.95, $5.85 and $6.75/mmBtu and JKM at $7.75, $6.80 and $8.80/mmBtu, above current forwards.
“We see weather and LNG supply disruptions as the main sources of near-term price volatility, with risks to our 2021 global gas price forecasts slightly skewed to the upside. Importantly, even in a bearish European scenario that triggered the closing of the US LNG export arb, we estimate that the associated European imbalance could be remedied with US LNG cancellations much shorter in duration than those of 2020. This would cause a significantly smaller net softening of US gas balances than in 2020.”
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