Commodity market report

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

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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.

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    Global gas markets - Highlights - Prices - H1 2016.xls

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    Executive summary

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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…
    • …while Asian spot LNG, priced off Europe, will also effectively be set by US gas price levels in the same period
    • Multiple risks exist

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