Fitch Ratings has increased its natural gas price assumptions for 2021 and 2022 due to strong year-to-date prices, recovering demand and supply challenges, the agency announced Thursday.
The most significant increases are to the European Title Transfer Facility (TTF) gas price assumptions and to the British NBP.
According to Fitch Ratings, TTF/NBP gas prices will now be $10 for a thousand cubic feet (mcf) for 2021 relative to $6 per mcf in the previous estimate. The Henry Hub price assumption also increased from $2.45 to $3.4.
The agency said the current record-high spot prices are driven by extreme weather conditions this year, low gas inventories in storage, strong demand in Asia, recovering demand in Europe and insufficient additional supplies.
Fitch said US gas prices have also benefited from heightened weather-driven demand, as well as US dry and associated gas production discipline. LNG and Mexico export demand also remains strong in the US.
'Inventory is about 174 billion cubic feet below the five-year average as a result. We believe these factors will support pricing over the next 12-18 months, but expect a normalisation of demand and potentially weaker producer discipline to result in a return to mid-cycle pricing in 2023 and thereafter,' it added.
By Murat Temizer