New Delhi: Thanks to supply tightness, the global crude oil and spot LNG prices are likely to rise over the next few years despite concerns over a demand reduction in key markets and overall economic slowdown, acording to a new report.”The balance of demand-supply across oil & gas sector suggests a narrow, albeit rising trend for both commodities over the next 12 months. While the muted trends for both commodities have lasted a tad longer than what we were estimating earlier, longer-term trends still hold,” equity research firm ICICI Securities said in a report.It estimates crude prices of $80-85/bbl, term LNG prices of $11-12/MMBtu and spot LNG prices of $16-18/MMBtu over 2023-24. This is well above the futures price averages of 79.1/bbl for crude and 15.5/MMBtu for spot LNG.
Term prices, which are typically linked as a percentage of Brent crude prices, are likely to increase steadily. Crude price data suggests inventory shortages across major storage hubs is starting to pile up, with some signs of a recovery in Chinese demand and the resumption of OPEC+ supply cuts to drive a gradual bump in crude prices over the rest of CY23.The report said the expansion plans for CY23E contrast with a 25 mt expansion in overall LNG traded in CY22 and similar levels of growth expected over the next few years. With all the worries about European storage being comfortable, lack of sufficient Chinese and Indian demand and recession worries, demand–supply remains fairly balanced. “We would continue to build steady increase in spot LNG prices over the next few years,” the report said.
The Russia – Ukraine conflict and the associated upheaval in the global gas markets have driven an unprecedented 25 mt growth in CY22 traded LNG volumes. With fresh liquefaction capacities still likely to average 20-22 mt annually, demand growth may need to keep up a run-rate of 22-25 mt annually for the next couple of years to match the demand.