Global Gas Market Update – Tight Source, Weak Sink (Part 1)

Global gas markets are undergoing a period of profound transition as LNG capacity additions shift pricing dynamics from demand destruction to demand creation. Unlike prior periods of oversupply, Europe is unlikely to contribute meaningfully towards absorbing the surplus with the 2022 energy crisis triggering a sustained reduction in the ability of the continent’s fundamentals to respond flexibly to relative price adjustments. Instead, Asian demand flexibility will be key going forward , effectively setting liquids parity as a price ceiling as spot LNG competes with LPG use in industrial settings. Meanwhile, the surge in US export capacity will require higher Henry Hub prices to incentivize the Haynesville production response required to meet feedgas requirements , driving the US SRMC higher . Thus, we see an emergent global gas market with an increasingly tight source and a weak sink, with the interaction between these ultimately setting global prices.