Global natural gas markets could remain tight through at least next summer, according to the International Gas Union (IGU), potentially causing prolonged demand destruction and keeping pressure on both Europe and Asia.
Europe is increasingly outbidding Asian buyers for LNG as it seeks to rebuild gas storage ahead of winter. European gas prices have risen sharply, with Goldman Sachs now forecasting an average of around €70/MWh, although prices could fall toward €50/MWh if LNG flows through the Persian Gulf improve. LNG exports from the Persian Gulf are currently estimated at only 15–25% of pre-war levels, with the disruption at the Strait of Hormuz limiting supply.
High European gas prices are also encouraging coal-to-gas switching in power generation. European utilities' coal consumption could increase by as much as 25% over the next six months, according to Reuters.
Asia is also facing higher LNG costs, although additional Russian LNG could become available to Asian buyers as the EU's ban on Russian LNG takes effect in January. Meanwhile, the IGU warns that prolonged high prices could lead to more permanent gas demand destruction, while stringent European climate and methane regulations could further affect LNG supply.