FSSIA Raises Key Commodity Prices by 40-100% amid Supply Crisis in Europe

The outlook of European countries toward this winter may look scary as they would struggle to find an alternate supplier to procure gas supply to replace Russian energy that they are expecting to cut reliance on the Kremlin by 90% this year.

In recent weeks, Germany declared a stage two emergency gas plan amid mounting fears from the reduction of Russian gas flows that would make this winter very crucial.

Facing supply shortage, the UK said that it will cut off gas supplies to Europe under an emergency plan that will be rolled out if the Russian energy crisis deepens.


Mr. Suwat Sinsadok, Managing Director of FSS International Investment Advisory (FSSIA), stated that the firm raised its key oil, coal and gas assumptions by 40-100% for 2022-24 due to rising demand and limited supply as the EU is facing a gas supply risk amid intensifying sanctions against Russia.

FSSIA believed the EU risks a looming gas supply shortfall as winter approaches, given that alternative gas supplies to replace Russian gas appear to be insufficient. Furthermore, the firm thought the recently introduced price cap policies for Russian gas and oil could handicap efforts to replenish the low level of gas currently in storage across the EU.

As the EU is trying to use LNG as an alternative energy, FSSIA believed that the bloc may not be able to source enough supply to meet its minimum demand estimated at 223mt of LNG equivalent, which could leave Europeans without fuel for heating their homes.

Based on the projections for tighter supplies amid the pent-up demand following the full reopening of the global economy and higher inflation leading to spikes in commodity prices as inflation-hedged investments, FSSIA revised its assumptions for oil, coal, and gas in 2022-24 substantially higher.

The firm revised its estimates for the Dubai oil price in 2022-24 up by 20-22% to USD120/110/110 per bbl; Newcastle coal price index up by 50-67% to USD300/250/250 per tonne; Henry Hub gas price index up by 40-50% to USD7/6/6 per mmbtu; and the JKM spot LNG price up by 88-100% to USD20/15/15 per mmbtu.

In addition, FSSIA maintained OVERWEIGHT on the Thai energy sector, preferring PTTEP and BANPU as upstream plays and IVL and ESSO as downstream plays.