Thought Leadership

State and predictions of the Gas and LNG Markets in 2023. What signposts to look out for?

What have the last six months meant for the gas and LNG markets and our product development? When do we consider the market to be fundamentally tight over the next three years, and what are the signposts for the rest of 2023?

Read our special insight from Sindre Knutsson SVP, Gas Market Research, Xi Nan SVP, LNG Market Research and Emily McClain VP, Gas and LNG Markets Research at Rystad Energy

Rystad Energy expects to see maintenance reduce LNG supplies through the summer and a normalization of the utilization rates of liquefaction plants versus last year. 

Xi Nan, SVP Gas & LNG Markets research, Rystad Energy

Prices dropped in 2Q 2023

  • International gas prices have intensified their decline in May, with the TTF falling from $12.5/MMBtu to $8.8/MMBtu, and the Asian spot LNG price from $11.6/MMBtu to $9.0/MMBtu for the month. This is a significant drop from the $30-$40/MMBtu price levels the market experienced in December 2022. The price drop has been driven by mild winter in the northern hemisphere, muted demand and healthy LNG supplies that has driven a strong build in European as well as Asian storage facilities. Gas storages are 68% full in Europe by the end of May, which is 27 Bcm higher compared to the same time last year.

  • LNG inventories in Japan and South Korea remain at robust levels. Both countries held around 4.6 Mt of LNG by the end of April. The softer fundamentals have driven international gas prices below the coal-to-gas (C2G) switching band, with both the TTF and Asian spot prices now trading under $10/MMBtu. In this price range, we will also see lignite to gas switching in Europe, which is needed to balance the market that is building up for a short-term oversupply.

  • In the US, fears of a sub-$2.00/MMBtu gas market have loomed all through the first half of the year but prompt month Henry Hub prices have mostly held out, only testing the waters briefly in late March. The collapse in gas prices this year was brought about by improvements in key market fundamentals: strong gas supply and healthy storage amid light domestic gas demand.

Will the market rebalance?

  • The market is now discussing whether we will see gas prices at zero during third quarter as storage levels in Europe continue to build at a fast clip, while demand growth remains very muted so far. This will be a repetition of what we saw last October, with a strong divergence between the spot and front-month prices in Europe, also supported by robust storage levels and low demand in the shoulder season. However, this time the market could see front-month prices plunge over one or more months in order to balance the oversupply in the market. The balancing will be driven by increased demand in Europe and Asia LNG as well as a reduction in gas and LNG supplies.

  • Rystad Energy expects to see maintenance reduce LNG supplies through the summer and a normalization of the utilization rates of liquefaction plants versus last year. However, to see a more comprehensive shut-in of LNG, prices will have to drop below $6/MMBtu for lower Egyptian supplies and below $5 for reduced US volumes. This represents the price floor when moving into the summer and fall.

  • In the US, supply grew enough last year to support both increased LNG exports and domestic demand. Meanwhile, volumes that would have gone to Freeport LNG were absorbed by the domestic market. This combination boosted gas storage inventories ahead of winter the 2022/23 – while winter never really materialized. The ramp up of Freeport in February was slow and trailed alongside light demand across the country on sustained mild weather in the first quarter of 2023. Storage stocks peaked at nearly 24% above the 5-year average in early March and are holding strong, sitting 17% above, as per latest reported levels by end-May. Henry Hub futures plummeted to 2020/2021 levels, with the weakness extending into the second quarter of 2023. The risk of a recession in the US has been a concern for gas market participants, considering the potential for reduced demand that could lead to strong storage levels all year and send prices even lower.

When winter comes (back) - what should we expect?

  • Despite the risk of short-term oversupply in international gas and LNG markets, we continue to see an underlying fundamental tightness. That’s also why we expect prices to tick upwards when moving into the winter as the weather gods again test how robust the gas market is.

  • Europe will have to continue curbing demand at 12% versus the five-year average over the next few years, which can be difficult in the event of a cold winter. The difference between a mild and a cold winter is up to 30 billion cubic meters (Bcm) of demand, which is around 6-7% of Europe’s total demand. This supports why we consider the market to be fundamentally tight over the next three years, while waiting for new LNG supplies from recently sanctioned projects to enter the market. That means that we expect the market to be volatile going forward and react to events or shock to the balances that can come back on account of China in the LNG market, European industries, or LNG outages.

  • On outages, so far in 2023, about 4.2 Mt of liquefaction capacity was taken offline in the first five months, out of which 3.2 Mt was unplanned. The Freeport LNG project, where 15.3 Mtpa of capacity went offline last June due to an explosion, gradually came back online in February. Norway’s Snohvit LNG, Australia’s Prelude and Corpus Christi in the US have also experienced outages so far in 2023. We expect large scale outages to have a strong impact on the market, going forward, in particular when going into the winter.

  • Expectations of mild US weather triggering lackluster demand alongside gas output expansion have kept the prompt month Henry Hub price steady, trading at $2.30/MMBtu as of 5 June. However, rising temperatures, ahead of peak summer demand, coupled with consistently strong power burns  - well above 2022 levels so far this year - will offer solid tailwind for higher prices in the second half of 2023. Still, even with US LNG exports increasing this year, it likely won’t be enough to support a strong uptick in gas prices if demand remains low at home amid high storage inventories. If gas prices stay lower for longer, we could see more declines in operator activity and possible shut-ins. Even so, we maintain the view that this a very low probability scenario because global benchmark pricing is still well above shut-in pricing levels when considering domestic the Henry Hub benchmark, cost of liquefaction and transportation. Furthermore, while the market anticipates short-term elasticity in supply as rig counts decline, the production outlook on the contrary has moved higher.  If the trend continues, the an oversupply may again occur as early as the fourth quarter of 2023, further exacerbating the market weakness through 2024.

LNG sanctioning activity in H2

  • Another trend to monitor in the second half of 2023 is LNG sanctioning activity. So far in 2023, Sempra’s Port Arthur LNG (13.5 Mtpa capacity) and Venture Global’s Plaquemines LNG (10 Mtpa) got final investment approvals in the US. Qatar has also moved forward with its train 12 and 13 from the North Field expansion that will add 15.6 Mt of new capacity by 2028. While 11.6 Mt of long-term LNG contracts have been signed so far in 2023, there can be a slowdown in new contracts, driven by softer market conditions and lower prices. With global gas prices back in the single-digit territory, attention is turning to the next phase of project development and looming oversupply later this decade. The LNG FID race that took off in 2022 appears to have slowed, with persistent inflation and labor shortages lifting capex estimates amid a tightening interest rate environment. The recent tightening of policy by the US Department of Energy on granting extensions on export authorizations to non-free trade agreement (FTA) countries blurs the outlook on the progress of multiple projects on the US Gulf Coast. Energy Transfer’s 18 Mtpa Lake Charles project, which is over 50% sold out on long-term contracts, was recently denied an extension on this basis.

  • Looking ahead, incremental gains in liquefaction capacity in the US – through the addition of Golden Pass and Plaquemines Phase 1 facilities – will boost LNG production, but not until 2024. Hence, the added volumes are not likely to support global markets this year. We will simply have to wait until next year for strengthened US and global LNG supplies. US natural gas supply is well positioned for growth and capable of providing the gas and LNG required by global markets this year, but gas infrastructure must continue to be built to accommodate this growth and support domestic and global balances.

The role of LNG in 3Q and 4Q

  • Without any newly built LNG facilities in 2023, a tight global market is likely to emerge later this year, given the under-supply situation. Hence, we fully expect Europe and Asia to continue competing for available LNG supplies.

  • Due to the continuous decline in global gas benchmarks (TTF and JKM), market participants have considered the possibility of US LNG cargo cancellations. Rystad Energy still maintains the view that this a very low probability scenario because global benchmark pricing still remains well above levels that would trigger shut-ins when considering the domestic Henry Hub marker, cost of liquefaction and transportation. Global gas demand could fall to the lower end of expectations as the return in EU industrial demand remains elusive but we expect the second half of 2023 to be higher, supported by weather driven demand in Europe and Asia. The risk of strong demand this summer will keep an upward pressure on the LNG market.

Bridging to the Energy Transition: Biogas and Biomethane

Despite seeing a fundamental deficit in global gas and LNG markets, the worst deficit and shock is behind us. With that, there is an increasing interest in the long-term fundamentals and the role of gas in the energy transition. As a response, Rystad Energy will continue to develop its long-term analysis of natural gas and LNG markets, including scenarios. Further, we will also prioritize to develop a solution for biogas and biomethane, which we believe has a large potential in the future energy mix.

Our product development in the last 6 months

Product development over these last six months have been about consolidation and making enhancements of our existing offering - responding to both market needs and client requests. We have seen the need to decode the LNG market and to guide our clients decision making in this space. We also see a growing potential in addressing the North American market in more depth and have therefore brought forth some product enhancements.

Decoding LNG trading

  • Earlier this year, we made available our datafeed through Azure SQL Server for the LNG Trade Solution. It is a faster, safer and frictionless way of live data sharing. It combines large amounts of different third-party data with your own, without the need for setting up pipelines or any data movement and copying and enables users to access live data in a secure environment.

  • We also released a powerful new ArcGIS LNG Vessel Tracker maps. This new release is a complementary feature to our existing dashboards and analytics with live, real-time and traceable data. The advanced and user-friendly interface maps link spatial AIS data and supply-demand fundamentals and include trajectories and details of voyages and past voyages, vessel statistics, gas pipelines, trade flows, voyage costs and floating storage visualization.

  • With European TTF price being ‘normalized’, knowing where to trade LNG on the spot market is becoming challenging. We therefore added LNG netback prices from individual liquefaction plant to each receiving country for vessels departing this day, in the next three and historical. This new offering provides LNG suppliers with a full picture of economics-based delivery options and facilitates LNG trading for both LNG sellers and buyers.

Focusing on North America Gas Markets

Over the last six months, product development was also focused on our existing North America Gas Solution, adding a new user-friendly North America dashboard covering supply/demand balances infrastructure through 2030 that comes to complement our short-term North America Fundamentals dashboard (2023-2025)​. These dual dashboards now provide a full comprehensive view of the North America gas market landscape. Also, we added new coverage on Canada and Mexico, including daily pipeline flow data, extensive trade flow coverage, including cross-border flows and infrastructure.


Xi Nan

Senior Vice President Gas & LNG Market Research