Global gas prices to remain under pressure

Over the past two years, weakening fundamentals and much lower oil prices have resulted not only in lower gas prices but also in strong convergence across regional benchmarks, the International Energy Agency (IEA) said.

In the first five months of this year, the average differential between Asian LNG spot prices and US prices was “just US$ 2.5/MBtu – a far cry from the average spread of around USD 11/MBtu that had prevailed between 2011 and 2014,”  the Paris-based agency said in its Medium-Term Gas Market Report.

“Well-supplied gas markets are set to keep global spot prices under pressure over the next few years while the emergence of large quantities of flexible LNG supplies from the United States is set to maintain a close link between North American prices and spot gas prices in other regions,” the IEA said in the report.

According to the IEA, in the U.S., prices are likely to recover from their 2015 lows as domestic demand needs and a steep ramp up in exports will require continued robust production growth.

In Asia gas prices will remain influenced by the oil price level. Yet, a period of oversupply coupled with increasingly flexible LNG markets is expected to gradually lessen such linkage, the agency added.