Unsurprisingly, given the present context of uncertain demand and looming gas bubble, with Europe as a whole well (over?) contracted in long-term supply contracts, the present update shows little difference from the previous, one-year old version. Indeed, no new contract was added to the database.
The Brent at $40-48/b in 2016 (vs. $52/b in 2015)
The Brent price averaged $39/b for first-half 2016, i.e. 25% lower than the 2015 average of $52/b. If the price were to remain within the $40-60/b range from now until the end of the year, the 2016 average would fall between $40 and 47/b.
The Brent rose steeply (+58%) between January ($31/b) and June ($48/b). The first quarter was dominated by economic fears, which gave rise to sharp downward corrections on the financial markets between December and February 2016. This led to some very pronounced downward movements on the oil market early in the year. On January 20, for instance, the Brent fell to $26/b, losing $10 in less than one month. The “Brexit effect” has also brought the oil price down: on June 24, the price fell to $46.7/b (-4%) due to Brexit-related financial and monetary consequences (e.g. a rise in the dollar) and economic uncertainties.
Even so, the trend since January has continued to be oriented upward, fueled by the weakness of the dollar until April and also by expectations of seeing a gradual shrinkage of the surplus oil supply. The underlying reasons were the relatively sustained oil demand in 2016 and the steady decline in U.S. production of tight oil since June 2015. Conjunctural factors also weighed on the price, especially production shortfalls in Canada and Nigeria. All of which served to offset the strong rise in supply from Iran, where production may have reached a plateau.
CEDIGAZ, the International Association for Natural Gas Information, has just released its « Medium and Long Term Natural Gas Outlook 2016 ». This scenario, which incorporates key objectives of current and also planned national energy policies, highlights the growing role of natural gas as a bridge fuel towards a long-term increasingly renewable-based, efficient and sustainable energy system. Given the vast low-cost coal resources, the future expansion of natural gas in the global energy mix will be driven by the implementation of energy and environmental policies aiming to shift away from coal and oil to cleaner fuels within the context of a gradually decarbonising electricity system. In this scenario, the future global natural gas expansion is supported by strong supply growth, particularly of unconventional gas and LNG, in a context of rising prices as energy markets re-balance. CEDIGAZ Scenario’s trajectory is on a 3°C path, with energy-related CO2 emissions increasing by 0.3%/year on average, reaching almost 35 Gt over the 2030-2035 period.