Gas prices plummet following mild weather conditions

gas natural almacenamiento

Caixabank Research | Natural gas prices have decreased almost 45% since the beginning of the year, but the outlook remains challenging. The warm start of the year alongside the uptick in LNG imports in Europe since Q4-22, have left European natural gas storages at historical maximums at the end of February (60% vs 40% last 5-year February average). Looking ahead, we have revised prices down for 2023 (to €113/MWh average price, down from €196/MWh), although not by as much as what future market prices suggest, as the difficulties in replenishing gas storage levels without Russian gas next Autumn (the EU has agreed a natural gas filling target of 90% for November) and the recovery of LNG demand from China could pose upward pressure on prices.

China’s Covid exit is key to oil outlook. The oil price has been hovering within a tight $10 range since the start of the year, whipsawed by optimism over China’s recovery and expectations of further interest rate hikes from the US Federal Reserve. While concerns about a global growth slowdown may create volatility in prices, we forecast an average oil price for 2023 of 86$ per barrel, as we expect the increase in oil demand from China will prop up prices (IEA expects China’s oil processing to reach a record of 14,4 million barrels per day in 2023, as larger refineries are expected to return output to peak levels in 2Q23), as the dollar’s strength moderates. Supply growth will remain limited as OPEC+ want to keep oil prices above 80$ per barrel.

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