In our recent energy market update, The Navigator, we reported that today’s energy prices are very high.
Elsewhere, in a recent summary by Reuters, global gas prices are at multi-year highs, driven by hot summers and storage demand.
Here are five things to note as global gas prices rally:
1. Global trade flows drive high prices
Supply and trade flows worldwide have lifted gas prices (year-to-date) in all key markets.
In its summary, Reuters highlight that prices for liquefied natural gas (LNG) in Asia LNG-AS are the highest for this time of the year since 2013; while Dutch wholesale and US natural gas prices are at multi-year highs.
There are also other global factors at work:
2. Shipments to Japan climb
June gas shipments to Japan climbed 18% from the previous month to a three-month high of 6.01 million tonnes.
In Japan, utilities are undoubtedly ensuring adequate power supply in anticipation of a hot summer and ahead of the Tokyo 2020 Olympic Games, due to start later this month.
3. China LNG imports rise sharply
China imported about 6.4 million tonnes of liquefied natural gas (LNG) in June – about 26% higher than the same period last year.
Analysts focus on China’s stockpiling for the coming winter, as the country attempts to avoid a situation like last winter, when spot prices rose to above $30 per mmBtu amid gas shortages.
4. Knock-on effect impacts Europe
In a knock-on effect of high Asian LNG prices, benchmark European gas prices have soared and the front-month price at the Dutch TTF hub recently hit a record high.
Reuters note: “When Asian spot LNG prices climb to multi-year highs, it is more attractive for exporters to sell their cargoes there, resulting in a dearth of cargoes for Europe.” The overall effect is that EU natural gas prices will need to move higher and faster than Asia in order to attract more LNG imports.
5. Russian gas supply levels reduced
Russian gas supplies to Europe have been cut by 15%-20% from 2019 levels, exacerbating an already low-inventory level situation in Europe.
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