August 2022
With US storage levels expected to lag behind the five-year average this summer, Henry Hub gas spot prices will soar.

AME forecasts the Henry Hub spot gas price will average US$7.8/MMBtu in the September quarter. This could rise significantly above forecast levels as scorching temperatures this summer stoke demand for the fuel of electricity generation.

AME’s European Composite Gas price forecast is US$40.0/MMBtu for the September quarter. Prices will remain elevated as reduction in supplies through Nord Stream 1 adds to a series of technical issues at LNG facilities globally that are exacerbating a supply crisis, while Europe aims to stock up ahead of winter.

Brent crude oil will average US$111/bbl in the September quarter. Crude oil prices will slide as recession risks battle scarce supply concerns. WTI will average US$109/bbl in the September quarter. Softer US demand is weighing on oil prices, although tight global supplies continue to keep the market buoyed.

Amid rising US domestic production next year, Henry Hub should retreat from US$6.8/MMBtu this year to average US$5.7/MMBtu in 2023 and 2024. The rate of US natural gas production will increase while LNG export and demand growth slow, contributing to higher storage levels.

AME anticipates that European gas markets will remain tight with elevated prices in 2022 and 2023-2024. Brent crude prices will move lower, from US$95/bbl in 2023 to US$86/bbl in 2024 due to easing global inventory pressures in both markets.

Several key trends will shape market forecasts for the industry beyond 2022. Populations and economies will grow and will require reliable, affordable energy. Until fossil fuels are displaced at scale, natural gas and oil pricing will continue to follow demand growth.

For the natural gas and oil industry, the next few years will see companies continue to reinvent themselves as they deal with the energy transition. This will focus on adoption of ESG strategies, capital discipline and financial health. Debt reduction was 4% in 2021.

Sustainability is becoming a focus of the oil and gas industry. Companies are steadily committing to climate change and transforming business models, to include renewable projects as a greater share of their energy portfolios. Norway plans for a major expansion of its offshore wind energy production to 30GW by 2040, aiming to turn a country that has built its wealth on oil and gas into an exporter of renewable electricity.

More companies are using M&A’s to green existing operations and strengthen ESG assets. The top country in terms of M&A deals activity in June 2022 was the US with 26 deals, followed by the China with 11 and Canada with six.

In 2022, as of June oil and natural gas M&A deals worth US$43.4bn were announced globally, marking an increase of 41.6% year on year. Global M&A activity remains well below pre-Covid19 levels as deals need to be both financially accretive and also support ESG goals. Longer term M&A activity will tend to increase.