Fitch Ratings has revised its TTF gas price assumptions for 2024-2025, reflecting year-to-date prices, seasonal and geopolitical factors, and reduced its Henry Hub assumptions for 2025-2026 due to the build-up of storage levels and still strong production. Oil prices and mid-cycle gas price assumptions are unchanged.
We have maintained all base-case oil price assumptions. OPEC+’s large spare capacity, increasing global production and moderating demand growth, leading to oversupply, will constrain Brent prices at about USD70 a barrel in 2025, although geopolitical factors will increase price volatility. We expect global oil demand growth to moderate to slightly below one million barrels per day (MMbpd) in 2024 and 2025 due to weaker Chinese consumption and efficiency gains. We believe the energy transition has started affecting global oil consumption growth, which is likely to continue to decelerate in the long term.
IEA forecasts supply to increase by about 2MMbpd next year, driven by production in the US, Canada and Brazil, which means that supply growth will exceed demand growth by almost 1MMbpd in 2025. At its June meeting, OPEC+ announced the extension of voluntary cuts of 2.2MMbpd until end-3Q24 and outlined plans to phase these cuts out by end-3Q25, but delayed the start of the unwinding to January 2025 at the earliest. OPEC+’s large spare capacity of 6MMbpd cushions the market in case of physical supply disruptions and constrains the magnitude and longevity of price increases. A potentially stricter stance of the new US administration on Iran may lead to oil supply disruptions from Iran, but this can be offset by OPEC+ spare capacity.
The reduction in our 2025-2026 Henry Hub price assumptions is driven by increased inventory levels due to a warm start to the northern hemisphere heating season and continued strong production. US storage levels are back at about five-year highs, while the natural gas rig count has increased to 102 in November from a low of 95 in September. Output declines have been modest in response to decreased drilling activity and production curtailments. These factors will put pressure on prices in the short and medium term. However, 3.9 billion cubic feet a day of liquefaction capacity scheduled to come onstream in late 2024 and 2025 will support prices at the level of our mid-cycle assumption.
The marginally higher TTF price assumptions for 2024 and 2025 reflect seasonal price increases and geopolitical factors, including the volatility of remaining gas supplies from Russia, as seen in recent disruptions to flow to Austria. However, the risk of disruptions to European gas supplies remains minimal as storage is 89% full, while Russian pipeline gas flows to Europe are expected to stop by end-2024. European gas consumption has decreased by 4% year on year in 9M24. Russian pipeline gas accounts for about 5% of EU consumption and can be replaced by LNG, although at a higher price initially. This is reflected in our increased assumption.
Source: Fitch Ratings