CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 84% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Gas prices to remain high this winter as shortage persists

By Fitri Wulandari

08:06, 22 October 2021

A gas stove burner on full flame
Fitch predicts demand for coal and gas in Asia will keep prices high this winter - Photo: Shutterstock

Natural gas prices will remain high this winter due to strong demand, before easing through the spring – assuming weather conditions remain normal.

That’s the forecast from Fitch Solutions, which says near-term natural gas futures in Europe and the US have retreated from early October highs given the mild weather and improved renewables power generation.

However, the risk of price volatility remains high given the shortages of coal and natural gas, especially in Asia.

Both fuels remain the key factors in energy prices, with any extreme cold weather likely to push consumption higher, forcing prices higher to ration supply, Fitch said in a briefing note.

2021 price forecast

Fitch forecast the UK National Balancing Point (NBP) price – the spot price of UK natural gas – to average $6.99 per million British thermal units (MMBtu) in 2021, more than double than $3.35/MMBtu in 2020, and will average at $7.48/MMBtu in 2022.

The natural gas price at US Henry Hub – a natural gas pipeline in Erath, Louisiana and the official delivery location for futures contracts on the New York Mercantile Exchange [NYMEX] – is forecast to average $3.90/MmBtu in 2021 and $4.20/MMBtu in 2022, according to the forecast.

Fitch said LNG imports to Europe wouldn’t outpace historic levels because of the high landed price for Asian LNG cargoes and the lack of price arbitrage to cover transport.

Gold

1,959.49 Price
+0.850% 1D Chg, %
Long position overnight fee -0.0183%
Short position overnight fee 0.0101%
Overnight fee time 21:00 (UTC)
Spread 0.30

Silver

23.20 Price
+0.130% 1D Chg, %
Long position overnight fee -0.0183%
Short position overnight fee 0.0101%
Overnight fee time 21:00 (UTC)
Spread 0.020

Oil - Crude

69.74 Price
-4.590% 1D Chg, %
Long position overnight fee -0.0155%
Short position overnight fee -0.0064%
Overnight fee time 21:00 (UTC)
Spread 0.03

Natural Gas

2.32 Price
-2.240% 1D Chg, %
Long position overnight fee -0.1274%
Short position overnight fee 0.1054%
Overnight fee time 21:00 (UTC)
Spread 0.005

“The prospect of insufficient LNG supplies to Europe this winter will add more price upside to weather events, with the bulk of extra supply likely to mostly come from Russia, whose recent comments have seen prices ebb on talk of additional supplies this winter,” the company said.

What is your sentiment on Natural Gas?

2.321
Bullish
or
Bearish
Vote to see Traders sentiment!

High price to dent demand

While it expects gas prices to remain high, Fitch said higher prices would see consumption fall as price-sensitive energy users reduce their consumption.

The first sectors to cut consumption have been industries highly dependent on energy as a share of costs. Fertiliser producers, steel and aluminium manufacturers, ceramics and glass factories have suffered high-profile fallout from soaring prices.

“Coupled with other supply-chain bottlenecks, higher energy costs have knock-on impacts to auto manufacturing, agriculture and food processing,” the company said, adding that higher energy costs are expected to add inflationary pressure.

Energy shortage to remain

Oil prices have benefited from the rise in energy prices, as power generators who are able to use oil power-generation capacity have switched, adding to global demand for crude. Increased demand for heating oil has also driven crude prices higher.

Fitch expects the energy shortage to remain an issue until peak winter demand has passed. However, a deeper than usual drawdown in natural gas and coal stocks could lead to price pressures across 2022, as users race to replenish stocks.

Read more: Natural gas price forecast: Strong demand to lift US prices?

Related topics

Rate this article

Capital Com is an execution-only service provider. The material provided on this website is for information purposes only and should not be understood as an investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. If you rely on the information on this page then you do so entirely on your own risk.

Still looking for a broker you can trust?

Join the 530.000+ traders worldwide that chose to trade with Capital.com

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading