Winter temperatures below seasonal norms in the northern hemisphere have created a rise in natural gas prices from Asia to Europe. Spotted liquefied natural gas (LNG) prices in North Asia jumped to record highs last week, while the key price marker in Europe, the Dutch securities transfer team (TTF), rose to record highs. highest in more than two years.
Natural gas markets in early 2021 look completely different from last year, when the milder climate and pandemic affected by demand had dragged natural gas prices to historic lows.
This winter season, a rise in Asian demand for natural gas, supply problems to major LNG exporters, logistics problems in the Panama Canal, high rates of oil tankers and, last but not least, the cold of Madrid to Tokyo, raise gas prices.
Even when temperatures return to seasonal norms in the coming weeks and the periods of cold caused by the Polar Vortex in Europe are over, natural gas prices will continue to hold up during the spring and summer as buyers would try to rest, analysts say.
Asian LNG prices may not last long, but these generally higher prices than last year’s lows will adjust to prices in Europe, which will likely receive fewer LNG loads this winter given that spot prices in Asia are very high, much higher.
In just two months, the global natural gas market became an oversupply or finely balanced market, at best, a tougher market, which caused price rises from Asia to Europe. Prices much higher in Asia and Europe than the American referent Henry Hub it will encourage spot sales of U.S. LNG in these markets and maximize U.S. liquidation capacity, analysts say.
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LNG spot prices in Asia have risen dramatically in the last two months and have now skyrocketed 18 times from the April 2020 lows and the the climb is destroying even the recent rise in Bitcoin prices.
A perfectly unusually cold winter storm in North Asia, disruptions to major LNG exporters and logistical and shipping restrictions made the price of the Asian LNG benchmark, the Japan-Korea (JKM) marker, the highest. high recorded last week. going up over $ 30 per million British thermal units (MMBtu) for the first time.
In Spain, home to one of the largest terminals in Europe, LNG prices also rose in the middle of an unusual cold in the country, which caused a rare snowfall in Madrid.
Lower-than-normal temperatures in many parts of Europe are causing higher-than-usual gas withdrawals, leading to higher-than-expected demand during spring and summer to replenish stocks.
Goldman Sachs expects one “Perfect bullish storm” for natural gas prices this year and increased its forecasts on European benchmark prices, the Dutch securities transfer team (TTF), to $ 8.30 / MMBtu for the rest of this winter, from of the $ 6.65 / MMBtu expected earlier. Goldman also raised its LNG spot price outlook in Asia to $ 14.30 / MMBtu from $ 12.65 / MMBtu.
“The current cold spell in the northern hemisphere is paving the way for a narrower global gas market year-round,” Wood Mackenzie said. dit last week in its outlook on the 2021 gas market
After the impressive rise, spot prices for Asian LNG will fall in the second quarter, but the current cold period is paving the way for an increasingly tight summer gas market, compared to what looked like a finely balanced summer just a month ago, says WoodMac.
Gas storage levels in Europe are already more than 15 billion cubic meters lower than last year and are now approaching the five-year average. Higher forecasts of European coal and carbon prices, also partially driven by the current cold period, “provide a maximum margin for increased European gas demand in the summer,” the consultancy noted.
“World prices hit record lows in 2020, with an average FTT of US $ 3.2 / mmbtu and an Asian LNG spot of US $ 3.9 / mmbtu. In 2021 it will show a big difference, we forecast a TTF of $ 5.6 / mmbtu on average and an Asian LNG point of $ 7.6 / mbtu on average, ”said Massimo Di Odoardo, vice president of Wood Mackenzie.
Rising spot prices for Asian LNG is good news for US exporters.
The widespread spread between Asian LNG prices and Henry Hub suggests that there is “very little chance” of seeing US LNG loading cancellations—As in the summer of 2020 – soon Warren Patterson, head of ING’s commodity strategy, dit in the bank’s Outlook Energy 2021.
“Regional gas markets will have better support during 2021, and it seems increasingly unlikely that charging cancellations will be repeated this year,” Patterson added.
By Tsvetana Paraskova for Oilprice.com
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