Natural Gas Markets Buckle Up for Unpredictable 2022

by Amy Myers

Currently, natural gas prices in the U.S. have plummeted due to the recent warm winter weather, but the rest of the world hasn’t been so lucky.

The global market for natural gas has been struggling within the past 18 months. Europe, in particular, has seen record lows and highs all within this time period. Just as the market started to rebound in the summer, European countries saw prices skyrocket in the fall. Now, both Europe and Asia will have to keep a close eye on the winter forecast as we continue into another unpredictable year of natural gas prices.

Another notable issue that the global market has seen is the amount of natural gas in storage. According to Nasdaq, European natural gas inventories are at their lowest in nearly a decade. In the past ten years, gas storage sites were, on average, 85% full. Now, they are only 70% full.

The recent colder weather has already boosted the demand for heating and power generation.

Homeowners aren’t the only victims of rising prices, either. Industries like steelmaking, fertilizer, and ammonia production have to cut back on their operations in order to keep their input costs in check. One of the most expensive costs is their use of natural gas.

Nasdaq reported that much of Europe’s natural gas price fluctuations depend on Russia’s gas flows via pipeline to Europe and the capacity of each tender.

“Every time Russia doesn’t book too much additional capacity, Europe’s benchmark gas prices jump,” the source reported.

Changes to the Natural Gas Markets Could Be Just as Detrimental in Asia

Meanwhile, the natural gas market in Asia saw a similar rebound as Europe earlier this year. Spot liquefied natural gas prices for January have even dropped by $1.50. But even this smaller cost still has Asia’s market at the same record-high price that it saw in the winter of 2021.

According to LNG suppliers, the demand for natural gas in Asia will continue to rise in the next few years. And, if the next few months bring colder weather than usual, even higher prices still.

If the market continues to see record-high prices, it could affect some major projects.

Take, for example, Woodside’s US $12 Billion Scarborough and Pluto Train 2 developments, which were given the green light to begin at the end of November. Higher import costs could not only stall the project but perhaps even deter cost-sensitive buyers altogether.

As For the U.S.

We’ve had some warmer weather recently that’s kept our natural gas prices low, but this won’t be the new normal. In fact, compared to last year’s low prices from the pandemic, this coming year’s energy bills will definitely take a bigger chunk of our change – 30% bigger, to be exact.

According to the National Energy Assistance Directors Association, now that businesses are back in full swing, the increase in natural gas use will most definitely affect the prices that homeowners see each month.