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Friday, November 4, 2011

European gas prices predictions 2012

European gas prices predictions 2012 : The European Union's natural gas network is likely to be oversupplied by over 10% in 2011 of last year's entire consumption, calling into doubt last summer's decision by many utilities to raise their retail gas prices for 2012.

At projected import, domestic production and consumption levels, the EU's gas market will have 50 billion cubic metres (bcm) more excess supply in 2011 than it did last year, and the system is likely to remain similarly long in 2012.

This compares to an EU consumption of 492.5 bcm in 2010, according to BP, and to more than France's annual gas consumption of 47 bcm, and only slightly less than Britain's 57 bcm production in 2010. Some analysts said the retail hikes had been based on wholesale rises earlier in the year. Energy companies generally make incremental forward market purchases several quarters ahead of delivery to cover their retail load (and) as a result the rise in wholesale gas prices over the second half of 2010 and first half of 2011 is still feeding into the cost of energy retailers. However, slowing economic growth has significantly pulled down wholesale gas prices, with the benchmark UK NBP Summer 2012 and Dutch TTF 2012 gas contracts down over 8% and 9% respectively since the beginning of September. The winters of 2009/2010 and 2010/2011 were amongst the coldest on record, and while forecasters also predict below long-term average temperatures this winter, expectations are slightly milder than for the previous years. The views on the evolution of the gas price are not similar among biggest banks.

US bank Goldman Sachs said they see a price recovery towards the end of 2012 as the economy recovers and Europe's prices react to the tightening Asian LNG market.

Societe Generale said it expected gas prices to drop in 2012 and that it did not see the LNG market tightening before 2013 or 2014. In countries where it is traded, the oversupply is also likely to affect the use and price of gas storage facilities.

Expectations of lower gas prices going forward makes storing the fuel less attractive, while reducing profit for companies that lease storage space. British utility Centrica expects to make less profit from selling gas storage space this year at its Rough storage site, the UK's biggest such facility, as the service loses significance in supplying gas in a well supplied market.

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