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Citi raises price forecasts for Asian and European gas prices in winter

Thursday, 14 October 2021 | 00:00

Citi has raised its price forecast for European and Asian benchmark natural gas prices, analysts from the bank said in a note issued late on Tuesday.

It has raised the base case price for the fourth quarter of this year to average at $32 per million British thermal units (mmBtu) for the Japan-Korea-Marker (JKM), which is widely used as a spot benchmark in Asia, and $30.90 for the Dutch TTF hub, a European benchmark TRNLTTFMc1.

Both prices are up $3 from Citi’s previous forecasts.

“Current prices are above fundamentally justified levels, should remain volatile and could still reach $100 per mmBtu or above this season if the weather gets very cold,” the analysts said.

“Asian/European natural gas prices are above diesel and propane, the last remaining expensive fuels that could be substitutes in some sectors.”

They added that low gas inventories, the potential for a cold winter and the likelihood of a limited supply response have led to price spikes in Asian and European natural gas, European power and global seaborne coal.

Inflation due to higher energy prices could hit industrial production and potentially curtail the growth in economic recovery following the coronavirus pandemic.

“For example, China’s industrial production is set to weaken further because of power cuts, as a result of coal shortages and high fuel prices that couldn’t be passed on to consumers. Other places confront a similar set of circumstances,” the analysts said.

“The macro impact could be enormous if this winter gets very cold in the Northern Hemisphere, exacerbated by potential supply disruptions.”
Source: Reuters (Reporting by Jessica Jaganathan; Editing by Stephen Coates)

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