Analysts split on whether gas rates will stay high

The melted gas (LNG) terminal at the Yangshan Deepwater Port in Shanghai, China, on Saturday, Oct. 9, 2021.

Qilai Shen | Bloomberg | Getty Images

Winter hasn’t even shown up, however gas rates have actually currently skyrocketed to tape-record highs in Europe and Asia on supply issues, while numerous energy providers in the U.K. have actually collapsed.

Natural gas supply is set to increase incrementally in the coming years, prior to leaping in 2025, experts informed CNBC.

But experts are divided on whether need will continue to overtake supply in years to come.

The present gas crisis will likely duplicate itself once again, stated Richard Gorry, handling director of JBC Energy Asia.

“This will be a crisis that is reoccurring over the next three or four years — simply because we don’t have a lot of new natural gas supply coming into the market in that period,” he informed CNBC’s “Capital Connection” in mid-October.

“By 2025, the situation may change, but I think we definitely have a couple of years where we’re going to be looking at high energy prices,” he stated.

But James Whistler, international head of energy derivatives at shipbroking company Simpson Spence Young, stated he does not anticipate rates to stay high beyond this winter season.

“Are we going to be in an energy crisis perpetually for the next three years? Absolutely not,” he informed CNBC’s “Street Signs Asia” on Wednesday.

“This is a short-term issue … come March or April next year, we’ll see much more reasonable prices starting to come through again,” he stated.

Pull towards tidy energy

Gas need is growing “quite rapidly” as nations try to move far from coal and oil, to cleaner energies, Gorry informed CNBC once again today. That indicates the world does not have adequate gas, and the marketplace will be really tight for the next 3 years, he included.

Natural gas is less contaminating than other standard fuels.

While he forecasted that the present crisis will circulate February or March, the marketplace will likely tighten up once again when next year’s winter methods and need increases.

Even if a scarcity of gas does not result in another energy crisis, it might trigger the world to draw on coal and oil, stated Gavin Thompson, Asia Pacific vice chairman of energy at Wood Mackenzie.

In a quote to satisfy its electrical energy requires, the U.K. fired up an old coal power plant in September.

Thompson anticipates gas to “feature prominently” in the steady approach a cleaner energy mix. However, he stated manufacturers are worried about the long-lasting future of gas, and might be underinvesting in supply.

If manufacturers do not invest enough, purchasers might reverse to standard fuels, he cautioned.

“That’s a big risk because … slowing the pace of the energy transition will make 2030 targets, 2050 targets really, really difficult to meet,” he stated.

‘Confluence of aspects’ in 2021

Other experts anticipate that gas supply in the coming years will have the ability to satisfy need.

Anthony Yuen, head of energy technique at Citi Research, stated gas supply is “getting better.” He kept in mind that significant melted gas export terminals are coming online and production is set to increase in Europe, Russia and China.

LNG export centers cool gas down into a liquid state so that it can be carried on ships to locations that cannot get the gas by pipeline.

The crunch this year was an outcome of a “confluence of factors” — from low hydro power generation in Latin America to “very strong” need for energy, he stated.

He stated the duration of “really high prices” might possibly trigger a downturn in need development, and questioned where need would grow rapidly enough to exceed supply.

Still, he didn’t totally eliminate a repeat of the energy crisis.

“Never say never,” he informed CNBC over a video call. “It partly depends on [the] weather. But then, once you factor in a number of supply and demand factors, the situation probably will be much better.”

Prices will likely trend lower after this winter season, and after that boil down “much more” in 2025 when a variety of LNG export terminals come online, Yuen stated.

— CNBC’s Sam Meredith and Chloe Taylor added to this report.


News and digital media editor, writer, and communications specialist. Passionate about social justice, equity, and wellness. Covering the news, viewing it differently.

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