Research agency Fitch Solutions has lowered its natural gas spot price forecast from $3.90/million British Thermal Unit (MBTU) to $3.70/MBTU, following a sharper-than-expected decline in prices in the fourth quarter of 2021.
Fitch Solutions says a mild start to the winter heating season in the US has resulted in seasonally low domestic demand.
Although the warmer weather has helped to boost natural gas storage levels, it has put downward pressure on prices, as concerns about a supply shortfall ease.
However, Fitch Solutions expects US natural gas prices to remain elevated well above historic averages, as export levels stay buoyant and supply growth remains modest.
The agency expects many of the same factors that drove prices higher in the second half of 2021 to stay in play this year. These factors include strong liquid natural gas (LNG) exports and healthy economic activity.
Fitch Solutions further forecasts Henry Hub prices to average $4/MBTU this year.
“The expected growth in US unconventional oil output in 2022 will provide increased associated gas volumes to the market that will feed new LNG export capacity next year.
“Given the tight global market for LNG, driven by strong Asian and European consumption, we expect US natural gas to remain in high demand, supporting our view for elevated Henry Hub prices,” Fitch Solutions elaborates.
Meanwhile, Fitch Solutions says Brent crude oil prices will average $72/bl in 2022, while industrial metals will trend lower, compared with peak levels in 2021.
The agency further notes that manufacturing-linked metals such as aluminium and tin could remain better supported than copper, which would suffer from a weakening economic outlook.
Iron-ore prices will trend lower in 2022, reaching an average $90/t by the end of the year, compared with current levels of $102/t and the 2021 average of $155/t.
The agency also expects gold prices to trend lower this year, as the dollar strengthens and bond yields continue to recover. It expects gold to average $1 700/oz in 2022, with continued bouts of volatility.
However, gold will remain supported in the near term as inflation runs at a multi-year high, which will maintain the appeal of gold. This will be balanced by rising risks of the US Fed raising interest rates at a faster pace than currently expected by market participants.