Will the Volatility of Energy Prices Impact Methanol Economics?
When we look at energy prices for 2020 – 2021 and the yearly forecast for 2023, thermal coal prices were elevated in 2021 due to supply availability. In 2022, they were expected to return to normal, but this did not happen. The main drivers behind elevated prices were renewed production appetite, increased demand, and many regions experiencing excessive heat waves.
The spot market is expected to ease this month, but market participants remain cautious. Prices are expected to come down in 2023 but not drastically. Crude oil prices increased this year after the Russia and Ukraine conflict started and were around the hundred dollars per barrel mark by the end of August, but we expect them to correct slightly in September. The oil market is also facing potential headwinds from the deteriorating economic outlook in the various regions. The impacts of inflation are creating another wave of uncertainties creating additional risk to the downside in the oil demand outlook for the remainder of 2022 and 2023.
Though the North American gas market has remained insulated from the very high global gas prices since the beginning of the year, the prices are at a higher level than normal. This is due to inflation, labor shortages, and supply chain bottlenecks. The market could be staring down a shortage of gas this winter so prices will remain elevated through quarter one of 2023.
Considering the title transfer facility TTF prices for European natural gas, since even before the Russia-Ukraine conflict started, prices were already at high levels due to supply tightness. Daily outturn prices reached the $90 per MMBtu mark in late August, and Russian pipeline gas facilities are currently at a record low with further volatility awaiting them. There’s a risk of further supply disruptions, leading back to higher forecast prices that will continue to beat historic levels every month through the spring of 2023.
Chemical Market Analytics by OPIS, a Dow Jones Company