Cinda Securities: New Opportunities under the Major Adjustment of the Global Natural Gas Landscape (Report Attached)

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International natural gas supply and demand are tightly balanced, and the supply structure has been greatly adjusted: On the supply side, global natural gas production will decline slightly in 2022, with the United States as the main force for increasing production, while Russian production will decline significantly. Looking forward to the whole year, according to the IEA, global natural gas production in 2022 is expected to decline by 0.49% year-on-year %. From January to September 2022, among the major net suppliers, the cumulative natural gas production of the United States was +4.2% year-on-year, and the cumulative production of Russia was -9.6% year-on-year (and the production reduction has expanded significantly since June, with a year-on-year decrease of 20.2% from June to September). In terms of demand, global natural gas demand will decline slightly in 2022, demand in North America will increase, consumption in Europe will be greatly reduced, and demand in Asia will be relatively flat. Under the “REPower EU” plan, the EU continues to promote the process of reducing dependence on Russian natural gas. From January to August 2022, the cumulative consumption of natural gas in the EU is -10.2% year-on-year; the demand for natural gas in Asia is suppressed by high prices, and the growth rate of demand in China, Japan and South Korea has slowed down significantly slow. The demand for natural gas in the United States has grown rapidly, and the cumulative consumption from January to August was +4.96% year-on-year. Looking forward to the whole year, the IEA predicts that global natural gas consumption demand in 2022 will drop by 0.78% year-on-year.

Domestic production has maintained steady growth, and foreign dependence has gradually declined: Since 2019, my country has implemented the “Seven-Year Action Plan” to increase reserves and production in the oil and gas industry, and vigorously promote the steady growth of natural gas production. Since 2022, despite the general slowdown in the growth rate of domestic and foreign consumption under the background of high gas prices, my country’s natural gas production has maintained a relatively high growth rate. The effect of the action of “reserving and increasing production” continued to show. In terms of structure, my country’s external dependence on natural gas has rarely declined this year, and energy security has been strengthened. The increase in pipeline gas is significant. From January to September 2022, my country’s imported pipeline gas volume has increased by +10.5% year-on-year (the China-Russia east line gradually increases the gas transmission volume). At the same time, my country’s LNG imports have fallen sharply, and some long-term gas sources have been resold overseas under the backdrop of a surge in European LNG demand. From January to October 2022, my country’s cumulative LNG imports -21.6% year-on-year. Under the influence of slowing economic growth and high gas prices, the growth rate of my country’s natural gas consumption has fallen sharply, and the cumulative apparent consumption from January to September 2022 has dropped to a historical low of 0.37% year-on-year. We believe that as the economy gradually stabilizes and recovers, there is a high probability that natural gas consumption will experience a recovery growth.

Gas price review: The production cycle superimposes the supply reduction of Russian gas to drive the international gas price to rise sharply. From the second half of 2021 to the end of the year, the contradiction between supply and demand of natural gas driven by the production cycle will begin to appear. At the end of February 2022, the conflict between Russia and Ukraine broke out, and the European Union stated that it would impose sanctions on Russia’s energy. It rose as much as 190.3 percent before retreating. Since June 2022, with the continuous decline of Russia’s pipeline gas volume and the limited LNG export capacity of the United States caused by the Freeport accident in the United States, European gas prices have experienced a period of sharp rise that lasted for nearly three months. TTF prices have been rising since June 9. 24 USD/MMBtu once soared to 91.7 USD/MMBtu on August 30, an increase of 282.7% during the period. The European Union attracts global LNG supply with high gas prices. Germany, France and other countries vigorously purchase high-priced gas to quickly replenish inventories. The original gas storage target is realized ahead of schedule. Therefore, after October, due to the limitation of storage capacity, the purchase demand has weakened significantly, and gas prices have dropped. Since mid-November, the EU entered the stage of inventory reduction, TTF gas prices have stabilized and rebounded.

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