Rystad: Gas prices set to recede in 2023 but remain elevated

Feb. 6, 2023

Gas prices are set to recede in 2023 based on the current trend but will remain elevated compared to historical levels as the structural deficit that began in 2022 will continue in 2023, Rystad Energy said in a research report.

“After averaging over $40/MMbtu in 2022, front month TTF prices are now testing $20/MMbtu levels, last seen in September 2021. Amidst an unseasonably warm winter, recovering nuclear and above normal wind power in Europe, and lower prices across the energy commodity complex, we are set up for a bearish start to 2023. However, the market balance is still precarious as Russian pipeline volumes are likely to trend at least 31 bcm lower on the year, only partially balanced by incremental LNG production in the Atlantic. Accordingly, TTF and Asian LNG prices remain at levels that are multiples of pre-invasion averages,” said Kaushal Ramesh, senior analyst at Rystad Energy.


Russian pipeline flow into Europe has been on a declining trend since the start of the year, as a substantially warmer than normal winter and more-than-adequate storage levels have served to limit gas demand. Lower Russian pipeline flows are unlikely to cause much concern as the European market has long prepared for those volumes to drop to zero, according to Rystad Energy.

Norwegian pipeline supply accounted for 29% of Europe’s gas imports in 2022 and the country will reprise its role as a pillar of European energy security in 2023. “We expect a slight increase in Norwegian gas exports this year to around 122 bcm compared to 121 bcm in 2022 as Hammerfest LNG increases production after returning from an extended outage last year,” said Ramesh.

European gas storage levels continue to hold over 83% (EU27+UK) and the slow pace of withdrawals may extend the bearish sentiment into summer.

Meanwhile, Freeport holds the key to improving near-term LNG supply in the Atlantic, and recent announcements suggesting extensive personnel training requirements and pending regulatory restart approval suggests a risk of a delay to late February at least, if not later. Every week of delay takes around four cargoes off the market and will limit downward price movements in an otherwise bearish environment, given Europe’s LNG requirements are higher than last year, said the analysts.

Asia, US

Pacific basin LNG demand has remained tepid through the winter, with most major buyers having stocked up in advance for severe weather. Buyers in India and Thailand briefly returned to the market as Asian prices fell below $25/MMbtu, but this is still too high a price to trigger a mass-return of price sensitive buyers, according to Rystad Energy. Even extended outages at QCLNG and Prelude FLNG, which have taken six cargoes off the market this year, did not manage to inject any bullishness.

“The big unknown in this region is the reopening of China, but we expect energy demand to ramp up only later in the year, with lower cost sources of energy taking priority, which may limit upside to spot LNG demand. Even so, the prospect of losing cargoes to Asia will incentivize Europe to keep prices elevated,” said Ramesh.

In the US, mild weather and recovering production have pushed Henry hub prices down. The supply picture will be further bolstered by any news of an extended outage on Freeport, as well as continued above-normal temperature forecasts. As a result, Rystad Energy does not expect a reversal of the bearish momentum in the near term.