Analysts divided on whether gas prices will stay high – .

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Analysts divided on whether gas prices will stay high – .


The liquefied natural gas (LNG) terminal at the Yangshan deep water port in Shanghai, China on Saturday, October 9, 2021.
Qilai Shen | Bloomberg | Getty Images
Winter hasn’t even arrived, but gas prices have already reached record highs in Europe and Asia due to supply issues, while several energy suppliers in the UK have collapsed.
The supply of natural gas is expected to increase gradually in the coming years, before surging in 2025, analysts told CNBC.

But analysts are divided on whether demand will continue to exceed supply in the years to come.

The current gas crisis is likely to repeat itself, said Richard Gorry, managing director of JBC Energy Asia.

“It will be a crisis that will happen again over the next three or four years – just because we don’t have a lot of new natural gas supplies on the market during that time,” he told ” Half-time CNBC’s Capital Connection. October.

“By 2025 the situation could change, but I think we will definitely have a few years where we are going to look at high energy prices,” he said.

But James Whistler, global head of energy derivatives at ship brokerage firm Simpson Spence Young, said he didn’t expect prices to stay high beyond this winter.

“Are we going to be in a perpetual energy crisis over the next three years? Absolutely not, ”he told CNBC’s“ Street Signs Asia ”Wednesday.
“This is a short-term problem… in March or April of next year, we’ll see much more reasonable prices start to appear again,” he said.

Pulling towards clean energy

Demand for gas is growing “fairly rapidly” as countries attempt to switch from coal and oil to cleaner energy, Gorry told CNBC this week. This means the world does not have enough gas and the market will be very tight over the next three years, he added.

Natural gas is less polluting than other traditional fuels.

While he predicted that the current crisis will pass around February or March, the market will likely tighten again as the winter season approaches next year and demand increases.

Even if a gas shortage doesn’t lead to another energy crisis, it could cause the world to fall back on coal and oil, said Gavin Thompson, vice president of energy for Asia-Pacific at Wood. Mackenzie.

In order to meet its electricity needs, the UK commissioned a former coal-fired power station in September.

Thompson expects gas to “figure prominently” in the progressive move towards a cleaner energy mix. However, he said producers are concerned about the long-term future of gas and may under-invest in supply.

If producers don’t invest enough, buyers could switch to traditional fuels, he warned.

“It’s a big risk because … slowing the pace of the energy transition will make the 2030 goals, the 2050 goals really, really hard to achieve,” he said.

“Confluence of factors” in 2021

Other analysts predict that the gas supply in the coming years will be able to meet demand.

Anthony Yuen, head of energy strategy at Citi Research, said the gas supply “is improving”. He noted that the main liquefied natural gas export terminals are being commissioned and production is expected to increase in Europe, Russia and China.

LNG export facilities cool natural gas in a liquid state so that it can be transported on ships to places that cannot receive the gas by pipeline.

This year’s crisis is the result of a “confluence of factors” -om low hydropower generation in Latin America to “very high” demand for energy, he said.

He said the period of “really high prices” could potentially cause demand growth to slow, and wondered where demand would rise quickly enough to exceed supply.

Yet he did not completely rule out a repeat of the energy crisis.

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

Prices are likely to drop after this winter and then drop “a lot more” in 2025 when a number of LNG export terminals come online, Yuen said.

– CNBC’s Sam Meredith and Chloe Taylor contributed to this report.

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