Commodity Market Report

European gas markets long-term outlook - Highlights - H1 2016

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13 June 2016

European gas markets long-term outlook - Highlights - H1 2016

Report summary

Global gas fundamentals have shifted – creating a lower for longer outlook for LNG spot pricing, both in the Atlantic and Pacific. Wood Mackenzie believes that a significant tipping point has been reached, whereby Russia is now incentivised to pursue market share in Europe. This is due to a combination of greater LNG supply availability to Europe, lower coal prices and a higher US gas price.  We outline the levers, and the risks, in this short note.

Table of contents

    • Introduction
    • Asian demand growth slows (again)
    • and LNG supply availability to Europe has grown
    • The lower coal price outlook requires very low gas prices to displace coal in Europe’s power sector
    • while US gas prices are expected to increase faster and rise higher, with implications for US LNG exports
    • Global fundamentals have reached a tipping point whereby Russia is incentivised to pursue market share
    • European spot prices will likely be set by US Gulf Coast LNG FOB in the medium term
    • Multiple risks exist

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    EES global gas markets - highlights - prices - h1 2016.xls

    XLS 206.50 KB

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    European gas markets long-term outlook - Highlights - H1 2016

    PDF 244.83 KB

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    Executive summary

    PDF 84.90 KB

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