The Short-Term Natural Gas Outlook Remains Bearish Owing To Weak Demand

The Short-Term Natural Gas Sentiment Is Weak As A Result Of Low Demand

Over the last six months, natural gas prices plummeted by over 75%. The natural gas market was extremely volatile in 2022 owing to supply chain uncertainties and export restrictions post the Russian-Ukrainian conflict. However, the recent downturn in the global economy with aggressive rate hikes by the United States Federal Reserve led to a downfall in industrial activities in 2023 and weighed down the global fuel demand.

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Dutch TFT, The Western European natural gas benchmark, surged in 2022 following the Russia-Ukraine conflict. In 2023, The European Union successfully weathered the situation by exploring alternate natural gas sources and conservation efforts. This, coupled with the relatively mild European winter season, offset the energy crisis.

The Asian Natural Gas Prices Sink To Pre-Russia And Ukraine Conflict Levels With China Shift

The Asian natural gas prices plummeted to levels last witnessed prior to the February 2022 Russian invasion of Ukraine. The decline in natural gas prices in the region can be attributed to the shift in China's procurement pattern.

Firstly, China partially shifted supplies from Australia to Russia since Russian gas has become cheaper following the punitive Western sanctions. China lowered its Australian LNG imports by approximately 30% in 2022 while increasing natural gas imports from Russia by over 40% during the same period.

China's return to coal is also weighing down on natural gas prices. As per the JOGMEC (Japan Organization for Metals and Energy Security), Natural gas sinked to 8.5% of China's energy consumption in 2022 from 8.9% in the previous year.

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As per the Procurement Resource article, natural gas prices witnessed a dramatic 75% decline in the past 6 months owing to supply chain uncertainties and export constraints post the Russia Ukraine conflict. However, the ongoing downturn in the global economy, coupled with the rate hikes by the United States Federal Reserve, has weighed down on the global fuel demand.

The natural gas prices in Asia reached pre-Ukraine conflict levels because China shifted supplies from Australia to Cheap Russian natural gas with the Western sanctions, while China's increased usage of coal also provided downward pressure on natural gas prices.