Global gas prices are at "extreme levels" due to low inventories and strong demand in Europe, and the market is set for a reasonably bullish five-year outlook, said Russell Hardy, chief executive officer of Vitol.
In a pre-recorded interview for the annual APPEC 2021 conference, Hardy said global oil demand remained 4 million barrels per day behind the pre-COVID-19 levels of 2019.
Extreme cold weather last winter thinned natural gas stocks in the West and inventories have failed to be rebuilt in time, resulting in record prices near $26 per million British thermal units (mmBtu).
"The low inventories have not been replenished in the way we like ... the prices are at extreme levels that are way in excess of the cost for the supply chains to manage to manufacture fertilizer and other chemicals," said Hardy.
Weather will be the single dominant factor driving demand and supply this winter, and the market is embracing for a few more months of volatility, he said.
Demand, however, has been less elastic especially from growth centres like China, where imports for both liquefied natural gas and pipeline gas have expanded strongly, he said.