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Volatility of LNG prices likely to increase during coming year

March 25, 2021

Kaieteur News:

Energy Finance Analyst, Bruce Robertson, is warning buyers of Gas and Liquefied Natural Gas (LNG) to beware of what is to come. On behalf of Institute for Energy Economics and Financial Analysis (IEEFA), Robertson said that the inherent volatility of the gas commodity is expected to increase in 2021, and that gas customers all over the world can expect that substantially higher prices will be a distinct possibility.

“While contract prices have been relatively stable in the recent past,” Roberton said, “this stability is likely to give way to a renewed period of volatility as drilling activity has been low, gas industry investment in production and development has stalled, and oil and gas companies continue to experience financial instability and poor financial health around the world.”

This prediction is not coming from a novice. According to IEEFA, Robertson has been an investment analyst, fund manager and professional investor for over 35 years. He said that such volatility in spot prices causes gas-fired power plants to be under-utilised, as gas can sometimes be expensive and unaffordable to source.

IEEFA posited that, that price spikes and volatility will exceed that which has been experienced in the last years, with increases in tariffs for gas and electricity customers as well. This means the electricity produced by gas will become unaffordable in emerging markets, because those markets are more price sensitive.

Robertson explained that recent spot price volatility has led to tenders being cancelled, and that prices are being offered at uneconomic rates. 

[Staff Report]

More: Gas price faces increasing instability moving forward – Energy Finance Analyst

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