What Will 2016 Bring for Gas Prices?

What To Expect?

With 2015 now nothing more than a distant memory, it is now the time to look forward and begin to anticipate what is likely to happen over the next 12 months for the energy industry, and how these predictions can be used to the benefit of our clients. Here at Energycentric, we’ve put our heads together to develop a short, introductory blog post that we hope will lead you through the coming months and give you an idea of exactly what you can expect when it comes to gas prices in 2016.

As you may, or may not, be aware, the gas market in Europe is extremely well stocked at present, with some experts even edging towards labelling the market as substantially overstocked for the continent’s requirements. One of the main reasons for this is that LNG (Liquefied Natural Gas), which is the liquid form of natural methane gas, has re-entered the European market. This has increased imports by 8 BCM Y/Y (Billion Cubic Metres, Year on Year), leading to such a substantial surplus.

This increase has come about despite the Netherlands reducing their supply, a drop which is predicted to be down by nearly 20 BCM from the previous year. However, to pick up the slack, Norwegian supply has increased, adding 8-10 BCM. It is thought that this will continue well into 2016 and even potentially 2017 as well. It’s also predicted that Russia will finish 2016 5 BCM Y/Y higher than the previous year too.

In comparison to 2015, it’s expected that the weather during Q1 (First Quarter) of 2016 will be colder as well, although not by a great deal. As you can probably imagine, this will mean that there is an added demand, potentially increasing prices for the period, as people look to combat the cold. Although when you think of this in terms of temperature, the increase may seem small, when you think about the millions who will use more energy as a result, the number quickly falls into perspective.

What is causing a lot of head scratching amongst experts is predicting exactly when LNG is really going to impact the market. How much of it is coming and when can it be expected over the next year? For our part, we expect supplies in Q1 to start showing an increase on the previous year, and then to continue increasing more as the year goes on.

A factor that we haven’t yet touched upon is the input of Qatari producers. There is much speculation over how much of the natural gas supply is already sold into the market by the Qataris, and we expect that there will be a further push by them as 2016 moves forward. The impact, therefore, will potentially mean a downward trend in prices.

So that is a brief look at what 2016 will bring for gas prices. For more information, or to find out the part that Energycentric plays in all this, feel free to call us on 01708 765555, or email us with your query.