Gas Prices to Recede in 2023 but Elevated vs Historical Levels

Gas prices are set to recede in 2023 but will remain elevated compared to historical levels according to a Rystad Energy report.

• The market is set up for a bearish start to 2023 with an unseasonably warm winter, recovering nuclear and above normal wind power in Europe.
• Lower Russian pipeline volumes of at least 31bcm in 2023 are only partially balanced by incremental LNG production.
• Norwegian supply accounted for 29% of EU gas imports in 2022. “We expect a slight increase in Norwegian gas exports this year to around 122bcm compared to 121bcm in 2022 as Hammerfest LNG increases production after returning from an extended outage last year,” said senior analyst Kaushal Ramesh.
• The slow pace of storage withdrawals may extend the bearish sentiment into summer.
• The big unknown is the reopening of China with energy demand expected to ramp up only later in the year. “The prospect of losing cargoes to Asia will incentivize Europe to keep prices elevated,” said Ramesh
• Every week of the delayed return of the US Freeport LNG terminal takes around four cargoes off the market and will limit downward price movements.