Natural Gas Prices Surge Amid Rising Geopolitical Concerns
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KUWAIT CITY, Oct 26: Kamco Invest’s recent report reveals that geopolitical tensions, particularly the Palestine conflict, temporarily drove up natural gas prices. The closure of the Tamar gas field in the Mediterranean Sea due to the turmoil in the Middle East added uncertainty to the markets. Additionally, fears of interference and sabotage following a leak in the Baltic Sea gas pipeline raised concerns, reports Al-Seyassah daily.
The Dutch TTF Natural Gas Futures saw a significant increase from 36.650 Euro/MWh on October 6, 2023, to 49.9 Euro/MWh by October 23, 2023, reflecting the impact of these geopolitical events. However, it’s essential to note that natural gas prices had been on a downward trend before these developments, especially in European markets. European prices were under pressure compared to those in Asia and the United States, which had strengthened during the second quarter of the year. Throughout 2023, natural gas prices had remained under pressure, despite significant gains in the previous year caused by the Russia-Ukraine conflict.
The World Bank Natural Gas Index had dropped by 62.1% during the first nine months of the year, reflecting the commodity’s weaker global sentiment and stabilization after a turbulent period. Fears of sluggish global economic growth had also affected natural gas demand, putting downward pressure on prices. The International Monetary Fund (IMF) had downgraded its global real GDP forecast for 2024, and the International Energy Agency (IEA) expected a slowdown in global natural gas demand growth. In the United States, natural gas prices had decreased by 66.0% year-on-year in September 2023, while European prices dropped by 80.5% year-on-year for the same month. Japanese LNG prices also witnessed a significant decline.
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However, it’s worth noting that natural gas and LNG spot prices in Europe had already been trending upward before the Palestine conflict, driven by labor strikes in Australia. Looking ahead, the ongoing instability in the Middle East, coupled with increased LNG demand in Asia, was expected to keep natural gas prices on an upward trajectory. US gas consumption had increased year-on-year in September 2023, with growth in the residential, commercial, and power generation sectors.
On the supply side, global natural gas production was forecasted to see marginal growth in 2023, primarily driven by North America, the Middle East, Asia Pacific, and Africa. European gas production had been declining. While natural gas demand in Europe was decreasing, there was a surge in gas demand in Asia, particularly in China and India. China’s natural gas consumption had increased, driven by economic activity and policy shifts.
The global natural gas market was influenced by the unavailability of additional gas supplies to compensate for the reduced Russian pipeline gas to Europe. Concerns were raised about filling the gap left by the decrease in Russian gas supplies. In the United States, natural gas consumption was expected to stabilize in 2023, with an increase in LNG exports. The country had become a significant LNG exporter, surpassing other nations. Qatar had signed multiple LNG contracts with European companies to provide much-needed LNG to Europe as it struggled to fill gas storage facilities for the winter due to the shortage of Russian pipeline gas. In summary, while geopolitical tensions initially drove up natural gas prices, supply and demand dynamics continued to shape the global natural gas market. The market faced challenges, but also opportunities, as it responded to a complex web of factors, from geopolitics to economic shifts and environmental concerns.
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