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Global Oil & Gas Ltd (ASX:GLV) (Global or the Company) which will be renamed Condor Energy Limited (ASX: CND) (Condor) following approval by shareholders at an Extraordinary General Meeting held on 10 April 2024, is pleased to provide the following activities report for the quarter ending 31 March 2024.
Highlights
- Review of recently acquired TEA licence area offshore Peru identifies over 20 prospects and leads in proven basin with producing oil fields
- High priority areas totalling 1,000km2 within Tumbes TEA selected for 3D seismic reprocessing to mature targets to drill ready
- Priority areas include existing Piedra Redonda gas field with an independently audited ‘Best Estimate’ Contingent Resources of 404 billion cubic feet (Bcf) plus ‘Best Estimate’ Prospective Resources of 2.2 trillion cubic feet (Tcf)#
- High potential Bonito, Volador and Raya prospects undergoing additional studies in conjunction with 3D seismic reprocessing
Figure 1 – Bonito prospect showing Top Zorritos reservoir contour and 76km2 trap closure
Technical Evaluation Agreement (TEA) LXXXVI - Offshore Oil and Gas Block (GLV 80% Working Interest)
During the March 2024 quarter, Global and US-based joint venture partner Jaguar Exploration Limited (Jaguar), continued the evaluation of their 4,585km2 Technical Evaluation Agreement (TEA or block) offshore Peru.
The block comprises over 3,800km2 of existing 3D seismic data and more than 7,000 line kilometres of 2D seismic. An aggregate of 1,000km2 of 3D seismic was selected during the quarter to undergo reprocessing and interpretation across three discrete highly prospective areas. Reprocessing will include pre-stack depth migration (PSDM) work across each of the three areas (Figure 2).
Figure 2 – Areas undergoing detailed seismic reprocessing and interpretation
The areas were selected following a review of the seismic data and other historical reports and information related to the TEA. Global identified more than twenty prospects and leads as detailed in the ASX release on 23 January 2024 of which three large scale oil and gas prospects, Bonito, Raya and Volador and one already discovered gas field, Piedra Redonda have been prioritised.
Piedra Redonda Gas Field
As part of the Company’s review of the Tumbes Basin, to identify areas in the TEA for additional studies including seismic repreocessing, the Piedra Redonda gas field, discovered in 1978 by the C-18X well, was reviewed.
The review of the Piedra Redonda gas field including a historical assesment contingent and prospective resource is detailed in the ASX release on 18 March 2024.
Click here for the full ASX Release
This article includes content from Global Oil & Gas Limited, licensed for the purpose of publishing on Investing News Australia. This article does not constitute financial product advice. It is your responsibility to perform proper due diligence before acting upon any information provided here. Please refer to our full disclaimer here.
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Global Oil & Gas
Overview
Global Oil & Gas (ASX:GLV) is an Australia-based oil and gas exploration company focused on developing its recently acquired Tea LXXXVI oil and gas block in Peru, located in the Tumbes-Progreso basin and near the prolific Talara basin. The project’s hydrocarbon exploration potential leverages Peru’s long history as an oil and gas producer, which dates back to the late 19th century when the country drilled its first well more than 150 years ago.
Oil and gas production in Peru is led by the Peruvian National Agency of Hydrocarbons (Perupetro). The country is resource-rich, with over 421 million barrels (MMbbl) of proven and probable reserves located in the 18 sedimentary basins.
Hydrocarbon fields, both on and offshore, in the Tumbes-Progreso and Talara basins currently contribute over 1.4 billion barrels of domestic oil production and 1.7 trillion cubic feet (TCF) of natural gas production. The Talara basin itself has cumulatively produced more than 1.6 billion barrels of oil and is surrounded by multiple historic and currently producing oil and gas fields.
GLV’s Tea LXXXVI project is the result of a technical evaluation agreement (TEA) with the Peruvian National Agency of Hydrocarbons (Perupetro), which provides GLV and its partner, US-based oil and gas exploration company Jaguar Exploration, the exclusive right for greenfield exploration activities over the TEA area. GLV holds an 80-percent interest in the asset with the remaining 20 percent held by Jaguar.
The project comprises a 4,858-square-kilometer oil and gas block in proven offshore hydrocarbon-bearing basins in Peru, including the prolific Talara basin. Offshore, Peru remains dramatically underexplored and has immense potential for hydrocarbon plays.
The TEA LXXXVI project entitles GLV to a two-year assessment of the block with the option to extend it for one extra year. This requires no minimum spending commitments from GLV. As such, GLV can focus on high-impact, low-cost exploration activities for the next 12 to 18 months, which includes desktop studies, and reprocessing of old 3D seismic data, among other activities. This is beneficial for GLV as it provides the company with an inexpensive and exclusive two-year option to convert all or part of the TEA LXXXVI area into a licence contract. In addition, news flow from low-cost exploration activities should keep investors excited about the company’s future.
Considering the block's potential, GLV has appointed a world-class technical team with more than 200 years of collective experience to develop the TEA LXXXVI asset. Several of the newly appointed team members have previously worked on the area covered by GLV, which should help in fast-tracking the development of the block. The team comprises proven oil finders with collective discoveries of more than 480 million barrels of oil equivalent of 2P reserves and more than 400 million barrels of oil equivalent in contingent resources in Peru and Colombia.
The experience of working in the TEA LXXXVI property and surrounding fields will be vital for GLV to expedite the understanding and evaluation of the asset.
Company Highlights
- Global Oil & Gas Ltd. is an Australia-based oil & gas exploration company focused on developing its recently acquired oil and gas block in Peru, TEA LXXXVI
- The TEA LXXXVI project comprises a 4,858 square-kilometer oil & gas block in proven hydrocarbon-bearing basins offshore including the prolific Talara basin (1.6 billion barrels produced, so far). GLV holds an 80 percent interest in the asset with the remaining 20 percent held by US-based oil & gas exploration company, Jaguar Exploration.
- The block is in proximity to multiple historic and current producing oil & gas fields. This includes the Corvina oil field, producing 4,000 barrels of oil per day, and the Alto-Pena Negra oil field which is currently producing around 3,000 barrels of oil per day, along with a total historical production of more than 143 million barrels of oil. This increases confidence regarding the hydrocarbon exploration potential of TEA LXXXVI.
- The company is undertaking a detailed work program on the project, including 3D seismic data processing, and geological and geophysical studies. This should help GLV generate certified prospective resources along with three to four drill-ready targets over the next 12-18 months.
- A world-class technical team with more than 200 years of collective experience was appointed by GLV to develop and advance the TEA LXXXVI offshore block.
- The company's other projects include the Georgina Basin project (EP-127) and the Sasanof Prospect (WA-519-P).
- EP-127 is located in the Southern Georgina Basin in the Northern Territory. The Basin covers more than 100,000 square kilometers in the Northern Territory and the western part of Queensland. This basin is one of the most prospective onshore basins in Australia with potential for both very large conventional and unconventional oil and gas deposits.
- The Sasanof Prospect is located in permit WA-519-P, where GLV holds a 25 percent interest. The Sasanof Prospect covers an area of up to 400 square kilometers and is estimated to contain a 2C prospective resource of 7.2 trillion cubic feet of gas and 176 million barrels of condensate.
Key Project
TEA LXXXVI Project
This oil and gas block is located on the northwest coast of Peru in the Tumbes-Progreso basin, in water depths that range from 100 meters to 1,500 meters. The project spans 4,858 square kilometers and is surrounded by historical and current producing oil and gas fields. The block includes the Corvina oil field which generated past production rates of up to 4,000 barrels of light oil per day. In the south is the Talara basin, which is one of the most productive basins in Peru having produced more than 1.6 billion barrels of oil. To the southeast is the Alto-Pena Negra oil field, one of Peru’s most productive fields, currently producing around 3,000 barrels of oil per day and with a total historical production of more than 143 million barrels of oil.
The project benefits from the presence of excellent infrastructure, including a refinery that is only 70 kilometers away. The block has seen exploration in the past, specifically in the early 1970s, when three exploration wells were drilled, all showing the presence of oil. In addition, historical data from 2D seismic surveys and more than 3,800 square kilometers of 3D seismic surveys are available for processing. The rarity of finding a large, undrilled area in a proven hydrocarbon basin system with completed 3D surveys is noteworthy.
The historical discoveries were mostly located in shallow waters and could prove to be an easy target for GLV. In addition, there is a high likelihood of further discoveries in deeper waters (400 meters to 800 meters). Utilizing historical seismic data, GLV along with its partner Jaguar have identified prospects and leads in the block that can be classified as prospective resources. Of particular interest are two main prospects – Bonito and Tiburon.
The company has planned extensive work over the next 12 to 24 months. The first 12 months will focus on reprocessing 1,000 square kilometers of 3D seismic data and carrying out amplitude versus offset (AVO) studies. The following 12 months will then focus on geological and geophysical studies including 3D seismic interpretation and structural analysis. By the end of two years, GLV aims to generate certified prospective resources along with three to four drill-ready targets. In addition, GLV is looking for a farming partner to cover the cost of drilling. The block has a billion-barrel potential according to Perupetro.
TEA’s 2-Year Work Commitment
Management Team
Matt Ireland - Non-executive Chairman
Matt Ireland, a partner at Steinepreis Paganin, is a highly experienced corporate and commercial lawyer with extensive experience in corporate governance and compliance matters as well as in mining and oil & gas transactions including joint venture agreements, M&A transactions, capital raisings and asset acquisitions/disposals. Ireland graduated from Murdoch University with a Bachelor of Laws and a Bachelor of Commerce in 2002 and was admitted to the Supreme Court of New South Wales in 2003 and the Supreme Court of Western Australia in 2004.
Scott Macmillan - Non-executive Director
Scott Macmillan is the managing director and founder of Invictus Energy Limited (ASX:IVZ) which, since listing on the ASX in 2018, has seen Invictus grow substantially in value from a microcap frontier explorer to an emerging oil and gas developer. Invictus Energy is an oil and gas company opening one of the last untested large fronter rift basins in onshore Africa. Macmillan is a reservoir engineer with more than 15 years of experience in oil and gas exploration, field development planning, reserves and resources assessment, reservoir simulation, commercial valuations and business development. Before founding Invictus, Macmillan worked as a senior reservoir engineer at Woodside Energy and AWE, during which time he participated in large offshore oil and gas field operations and the development of the Waitsia Gas Field.
Troy Hayden – Non-executive Director
Troy Hayden has more than 25 years of experience in the upstream oil and gas industry. He has worked on numerous oil and gas asset acquisitions, divestments, and M&A transactions. He is currently the business development manager at Transborder Energy, a small-scale Floating LNG company. He was the CEO at ASX-listed Tap Oil for six years and worked at Woodside Petroleum for 12 years, where he held a number of senior leadership positions. He has consulted with several resource companies, working with First Quantum Minerals (acting CFO), QR National (group treasurer) and Western Gas.
Anna Mackintosh – Company Secretary
Anna Mackintosh has over 26 years of commercial experience, including 11 years with BHP and 10 years with AFSL holder Kirke Securities as compliance manager, finance manager and responsible executive. In addition to GLV, she also serves as company secretary of TAO Commodities (ASX:TAO), Marquee Resources (ASX:MQR), and XS Resources.
Elixir Energy
Overview
Elixir Energy (ASX:EXR) is a gas exploration and development company currently focused on its portfolio of natural gas assets in Queensland, Australia and Mongolia. As an early mover in both areas, Elixir Energy has been the first company ever to free-flow gas from the deep Taroom Trough in Queensland and flow gas of any description in Mongolia.
Elixir Energy’s Grandis Gas project in Queensland is located in the Taroom Trough in the Southern Bowen Basin, where Australia’s premier physical and commercial gas hub – Wallumbilla – is immediately adjacent. Market factors are now driving new rounds of drilling in the Taroom Trough contributing to its reputation as an emerging energy super basin with major electricity as well as gas infrastructure.
A successful free-flowing test was conducted on the Lorelle Sandstone and has indicated it could produce a commercial flow rate of gas, with the breakeven commercial initial flow rate estimated at 2.5 million cubic feet per day.
Gas flow from Stage 1 Lorelle Sandstone post stimulation
Elixir Energy’s Nomgon coal-bed methane (CBM) project is located in Mongolia.
The Nomgon CBM project is in the South Gobi region of Mongolia and on the Chinese/Mongolian border. The ideal location of the asset provides access to excellent infrastructure, including planned pipelines and local mines as customers. The Nomgon project includes a CBM pilot production plant, which flowed gas in its early stages and is now moving to progressively de-water with a view to building up a sustained gas flow rate.
The company is led by a highly experienced team with direct histories in Queensland, Australia and Mongolia and expertise in the natural resources industry, community engagement and working with government stakeholders.
Company Highlights
- Elixir Energy (ASX:EXR) is an exploration and development company with energy assets in Australia and Mongolia, targeting natural gas and renewable energy/hydrogen.
- The company’s Grandis Gas project in Queensland is located in an established gas and oil region, with exceptional access to existing infrastructure and high gas prices.
- The region is currently hosting multi-operator activity, including by Shell.
- Elixir has discovered a deep free-flowing gas zone in Grandis – the first of its kind.
- The company was also the first to flow natural gas in Mongolia, pioneering production in the country.
- A management team with a wide range of expertise in the natural resources sector provides leadership for maximising the value of Elixir Energy’s assets.
Key Projects
Grandis Gas Project
The company’s asset in Queensland, Australia, covers approximately 1,000 square kilometers in an established oil and gas province. The project is well-suited for cost-effective transportation to domestic and international gas markets.
Project Highlights:
- Strong Local Infrastructure: The region's long history of oil and gas production has resulted in a robust infrastructure, including gas transportation and electricity transmission access – and community support for the industry.
- Adjacent to Current and Proposed Pipelines: The asset is located close to existing – and proposed gas pipelines to assist in efficient and low-cost transportation as production commences.
- Impressive Initial Flow Test Results: After a successful suite of DFITs, free-flowing test on the Lorelle Sandstone has been successfully stimulated. Elixir’s technical and economic modeling indicates the Lorelle Sandstone alone could produce a commercial flow rate of gas, with the breakeven commercial initial flow rate estimated at 2.5 million cubic feet per day.
Daydream-2 Lorelle Sandstone Flow Testing*
Nomgon CBM Project
Elixir Energy’s 100-percent-owned coal-bed methane (CBM) project is ideally located in the South Gobi region of Mongolia. This location gives the asset access to robust local infrastructure and close access to Chinese energy markets – the world’s largest.
Project Highlights:
- CBM Pilot Project In Production: The pilot plant passed a key production milestone of 200,000 square cubic feet per day in its early stages. Water production has progressed since these early flows with a view to de-pressuring the CBM reservoir, leading to sustained gas flows.
- District-scale Asset: The Nomgon project covers a significant 30,000 square kilometers in Mongolia. Initial exploration campaigns have been promising and indicate the potential for the asset to become a significant producer of regional energy markets.
Management Team
Richard Cottee - Non-executive Chairman
Richard Cottee was appointed as the non-executive chairman of the company on April 29, 2019. Cottee was the managing director of coal-seam-gas(CSG)-focused Queensland Gas Company (QGC) during its growth from a $20-million market capitalization junior explorer through to its acquisition by BG Group for $5.7 billion. QGC’s CSG assets are now operated by Shell and produce gas that is sold to China and other LNG markets.
Originally a lawyer, Cottee has spent the vast majority of his career in senior executive roles in the energy industry, including as CEO at CS Energy, NRG Europe, Central Petroleum and Nexus Energy. A 32-year veteran of the industry, Cottee is a strong business development professional and a graduate of The University of Queensland.
Neil Young - Managing Director and Chief Executive Officer
Neil Young was appointed to the board of Elixir on December 14, 2018, as its chief executive officer. Young has more than 20 years of experience in senior management positions in the upstream and downstream parts of the energy sector, focusing on business development, new ventures, gas marketing and general commercial functions. He has worked for a range of companies in the UK and Australia, including EY, Tarong Energy and Santos. Young founded Golden Horde Ltd in 2011 to explore gas on the Chinese border in Mongolia. He has also developed various new ventures in other countries including Kazakhstan, Japan and the USA. Young has an M.A. (Hons) joint degree in economics/politics from the University of Edinburgh.
Stephen Kelemen - Non-executive Director
Stephen Kelemen was appointed as the non-executive director of the company on May 6, 2019. Kelemen led Santos’ coal seam gas (CSG) team from its inception in 2004 and drove the growth in this area that allowed Santos to become one of Australia’s leading CSG companies.
An engineering graduate from Adelaide University, Kelemen served Santos for 38 years in multiple technical and leadership roles.
Kelemen is currently an adjunct professor at the University of Queensland’s Centre for Coal Seam Gas and also acts as a non-executive director on the boards of Galilee Energy (ASX:GLL) and Advent Energy.
Anna Sloboda - Non-executive Director
Anna Sloboda was appointed as the non-executive director of the company on October 1, 2020. Sloboda is a joint Belarusian/Australian citizen and has more than 20 years of experience in corporate finance, and in developing junior resource companies operating around the world.
Sloboda is currently an executive director of Red Citadel Resources Pty Ltd, a privately owned mineral resources exploration company with a range of projects in Africa and South America.
She also serves as an advisory committee member, maritime archaeology, at the Western Australian Museum.
Previously she was a co-founder of Trans-Tasman Resources and in that capacity had substantial experience in dealing with Chinese off-takers and partners. Other prior employers include Lehman Brothers, Clough and Curtin University.
Sloboda has a Master of Economics from Belarusian University and an executive MBA from Melbourne Business School.
Victoria Allinson - Company Secretary and Chief Financial Officer
Victoria Allinson is a fellow of The Association of Certified Chartered Accountants, a fellow of the Governance Institute of Australia and an NSX-nominated advisor. She has more than 30 years of accounting and auditing experience, including senior accounting positions in a number of listed companies and was an audit manager for Deloitte Touche Tohmatsu. Allinson has gained professional experience while living and working in both Australia and the United Kingdom.
Her previous experience has included being company secretary and CFO for a number of listed companies, including ASX-listed: Kiland, Safety Medical Products, Marmota Limited, Centrex Metals, Adelaide Energy, Enterprise Energy NL, and Island Sky Australia as well as several unlisted companies.
Quarterly Activities Report for the Period Ended 31 March 2024
HIGHLIGHTS
- Daydream-2 successfully flowed from the Lorelle Sandstone without stimulation
- Very material increase in prospective resources in deep coals
- Analysis undertaken post end of quarter indicates the Lorelle alone could produce a commercial flow rate
- Daydream-2 program remains fully funded with current cash equivalent held of $11.9M
MANGAGING DIRECTOR’S REPORT TO SHAREHOLDERS FOR THE QUARTER
Following the drilling of the Daydream-2 well at the end of the December quarter, the March quarter has been one of intense analysis and preparation for the next phase of the Grandis appraisal program.
Just after the end of the quarter, that phase kicked off with the successful flowing of gas from the Lorelle Sandstone at ~4,200 metres – critically, without stimulation, which is a first for the Taroom Trough.1
This activity is occurring at a time of now widespread recognition that the East Coast Australian gas market faces imminent supply shortfalls, prices are high and expected to stay high, and growing international geo-political tensions put a premium on LNG supplies from stable countries like Australia.
Daydream-2 Lease during 2nd flow period of Lorelle Sandstone
The drilling of the Daydream-2 well late in 2023 finished up with a unexpected but very pleasant surprise – gas free flowing from a formation at a depth of 4,200 metres (called the Lorelle sandstone) – something not encountered in the Taroom Trough before.
The primary targets of Daydream-2 are tight gas and coal formations that require stimulation to flow – a free-flowing zone adds a lot to these in terms of economics (lower costs, possibly lower decline rates, energy in the well-bore, etc).
In January we undertook laboratory analysis of samples obtained from the sands captured at the wellsite from the Lorelle sandstone. This work identified clay rims on the sands that preserved porosity in this highly pressured deep zone. These results are analogous with the high productivity deep Permian section of the Perth Basin which has been a source of enormous success in recent years.2
Click here for the full ASX Release
This article includes content from Elixir Energy, licensed for the purpose of publishing on Investing News Australia. This article does not constitute financial product advice. It is your responsibility to perform proper due diligence before acting upon any information provided here. Please refer to our full disclaimer here.
Oil and Gas Price Update: Q1 2024 in Review
Additionally, Russia also committed to a voluntary production cut of 471 thousand barrels per day for the second quarter of 2024, alongside reductions in exports.
OPEC’s decision to curb output in the name of stability was a factor Eric Nuttall partner and senior portfolio manager at Ninepoint Partners pointed to as a Q1 catalyst.
“Oil volatility has actually fallen,” said Nuttall during an April 5 interview. “You wouldn't know it necessarily when looking at the oil price, but volatility is low. I think you can attribute that to the OPEC cut, that was one of the biggest goals of OPEC’s intervention into the market was to reduce volatility.”
As Nuttall explained, the effort to minimize volatility was successful and helped keep the benchmarks between US$70 – US$87 per barrel throughout the 90-day session.
Oil market update: Rebounding prices
Chart via TradingEconomics
After reaching a 2023 high of US$93.10 (Brent) on September 11, prices spent the remainder of the year sliding until bottoming at US$75.80 on December 4.
WTI followed a similar trajectory displaying slightly more volatility, reaching a yearly high of US$91.43 in late September, then slipping to US$68.71 in early December.
Chart via TradingEconomics
The subsequent upswing in prices can be attributed to several factors, according to Nuttall, Firstly, values are rebounding from a period of low activity, driven by unfounded concerns about weak demand and exaggerated fears of increased US shale production.
Secondly, OPEC's production cuts which played a significant role in reducing oil inventories.
He explained that typically, demand is weakest at the beginning of the year, but this time, inventories have only seen a minimal increase compared to the substantial buildup last year. This underscores the effectiveness of OPEC's cuts in counteracting the impact of strategic petroleum reserve releases and stabilizing oil prices.
“Lastly, we do have a geopolitical risk premium and the oil price now, I'm guessing US$5 a barrel,” said Nuttall.
He continued: “We haven't had a risk premium in quite a while. But what we're seeing in the Middle East, what we're seeing [with] Russia, Ukraine, it just fast forwarded where I thought we were going to be, I thought we'd be at US$90bbl in the summertime, we’re there a few months earlier than I thought.”
Oil market update: Strategic reserves
At the end of January oil prices dipped below US$77bbl (Brent) following a rally that took futures into overbought territory. Despite military tensions escalating in the Middle East, abundant supplies contributed to the decline, with OPEC+ exports exerting additional pressure on prices.
Prices began to recover in early February, breaking through the US$80bbl level on February 5, and remaining above the threshold for the remainder of the quarter.
On February 26, The US Department of Energy released a solicitationto purchase up to 30 million barrels of crude oil for the Strategic Petroleum Reserve (SPR), aimed at enhancing the nation's energy security.
In 2022 the Biden administration withdrew 32.3 million barrels from the SPR for domestic consumption.
“Analysis from the Department of the Treasury indicates that SPR releases in 2022, along with coordinated releases from international partners, reduced gasoline prices by as much as 40 cents per gallon,” the government announcementnoted.
Less than a week later the administration scrapped a purchase that would have added 3 million barrels back to the SPR, citing high prices.
While Ninepoint’s Nuttall doesn’t think SPR restocking will impact broader oil prices, he was surprised by the government’s decision to restock.
“The biggest threat to his re-election is inflation. And the biggest input to inflation is energy pricing, specifically oil and gasoline,” said Nuttall. “So, it was counterintuitive to me, and I think it was purely for political theater, that he started to refill it.”
By the end of March prices had breached US$85bbl and closed the three-month period above US90bbl.
Oil market update: Long term bullishness
In a special report from FocusEconomics, panelists are forecasting a 10 percent decline in spot prices for Brent and WTI crude oil over the next decade compared to 2023 levels.
However, prices are anticipated to remain historically high in the near term due to increased demand from China and India.
The consensusamong the FocusEconomics panelist is for Brent crude oil prices to
average around US$85 per barrel for the remainder of the year.
Nuttall is taking a more bullish stance, supported by an increase in demand while global inventories are already at multi-year lows.
Using the Days of Supply metric, a calculation that estimates how many days current inventory levels will last, based on the current consumption rate, Nuttall expects inventories to reach the “lowest level in history later this year.”
“That's very supportive of a high price,” he said.
Similar to FocusEconomics’ analysis, Nuttall sees oil prices remaining in the US$90bbl range.
He noted that geopolitical events have accelerated the approach to this price target, and the subsequent trajectory of prices will depend on when Saudi Arabia decides to return barrels, the pace of that return, and developments in the Middle East and Russia.
While there are uncertainties, such as potential infrastructure damage and the impact on oil flow, factors like stronger US demand, better-than-expected European performance, and solid demand from India contribute to his bullish outlook.
“But we're not calling for US$150 oil, we just don't think that's reasonable right now.”
Gas market update: Q1 2024 in review
While oil prices remained relatively stable throughout Q1 2024, gas prices sank to multi decade lows, hitting US$1.55 per Metric Million British Thermal Unit (MMBtu).
The decline was attributed to a warmer than expected winter in the Northern Hemisphere and ample supply.
Chart via TradingEconomics
“Higher LNG production (up by 3 percent y-o-y), together with stronger piped gas deliveries to Europe and China, further eased supply fundamentals and supported demand growth,” the International Energy Agency’s (IEA) latest gas report stated.
The market overview also noted that global demand was up 2 percent for the quarter but was more than offset by the production uptick.
Gas market forecast: Geopolitical fragility
Looking forward prices are expected to remain well below the highs set in 2022 when values neared US$10MMBtu, propelled by market uncertainty brought on by Russia’s invasion of Ukraine and fears around supply security.
After a steep decline in late 2022, prices have remained below US$5MMBtu throughout 2023. Although concerns about the Panama Canal and Red Sea disruptions led to speculation about a geopolitical premium, the uptick has yet to materialize in the gas market.
For the remainder of the year, FocusEconomics panelists expect natural gas prices to decrease in Asia and Europe compared to 2023 averages, while remaining steady in the US, staying below the pre-pandemic 10-year average.
Prices could see declines brought on by an abundance in gas inventories in all regions, attributed to mild weather conditions from the El Niño pattern and subdued industrial activity.
Europe will continue to be the region to watch as ongoing sanctions on Russian gas, conflict in Ukraine and supply security trends could add tailwinds to prices.
“The structural deficit in European natural gas has yet to be fully resolved with increased LNG supply not yet fully making up for lost Russian imports. Thus, European gas prices remain vulnerable to supply interruptions or increases in demand,” a Goldman Sachs (NYSE:GS) analyst said. “This is especially the case during winter, when weather-dependent heating comprises the bulk of demand and bouts of cold weather can lead to rapidly falling stocks and higher prices.”
Moving into 2025, increased US LNG export capacity could facilitate a price convergence among regions by the end of the year.
“In 2025, US natural gas prices are expected to surpass the pre-pandemic average, with Europe seeing a slight increase and Asia maintaining stability,” FocusEconomics Natural Gas Market Outlook read.” The absence of El Niño is predicted to boost heating demand, while industrial output growth will drive up consumption.”
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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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