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Platts Snapshot


Shift in pricing dynamics between European gas curves, NE Asia LNG

With Mel Sawaryn, lead analyst, S&P Global Platts Analytics

June 14, 2018 16:03:23 EST (2:47)

Pricing dynamics between European gas curves and North East Asian LNG prices have shifted within the last month. Until it faltered in late May, the oil price rally had supported a cross-commodity increase across coal, natural gas and LNG. Since then, Brent has come off its $80/bbl highs but spot LNG prices in North East Asia have continued to rise decisively in spite of the lower oil prices. In Europe, gas prices for the balance of summer have softened. Mel Sawaryn, lead analyst, S&P Global Platts Analytics, reports.

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Video Transcript


Shift in pricing dynamics between European gas curves, NE Asia LNG


By Mel Sawaryn, lead analyst, S&P Global Platts Analytics


Welcome to The Snapshot, a series examining the forces shaping and driving global commodities markets today.


Pricing dynamics between European gas curves and North East Asian LNG prices have shifted within the last month. Until it faltered in late May, the oil price rally had supported a cross-commodity increase across coal, gas and LNG. Since then, Brent has come off its $80/bbl highs but spot LNG prices in North East Asia have continued to rise decisively in spite of the lower oil prices. In Europe, gas prices for the balance of summer have softened.


These changes suggest markets are taking more direction from fundamentals. Western European gas and LNG storage stocks reached historical lows at the end of W-17 following a late winter cold blast, and this increased the need for storage injections over the summer.


This Q2 so far, Russian deliveries to Europe are up at record levels for the time of year. Gas demand has also been lower year-on-year, the result of a mild spring, higher generation from renewables and stronger availability of nuclear capacity. As a result of higher Russian supplies and lower demand we have seen gas storage levels reduce their deficit to last year.


At the end of May, stocks were down just 3bcm year-on-year in continental North West European storages, and by the end of June we expect that gap to narrow further to just over 1bcm. Moreover, a step up in LNG deliveries to North West Europe in the second half of May and early June has lifted LNG storage levels, which are now up year-on-year.


The pace at which this catch up has happened is a key driving force behind the softening in Q3-18 contracts since late May, in both absolute terms and relative to coal + carbon support levels. Concl. (80) This has happened against a rally in North East Asia’s JKM LNG price.


Fundamentally its rise is supported by Chinese and South Korean spot demand as well as number of outages affecting supply from liquefaction projects. As a result, the JKM and JKM Swaps have risen against European contracts for the balance of summer, opening up the reload arb once again. Up to now we have seen a return to trans-shipments of Yamal cargoes out of Europe.


We now await the first direct deliveries from the project to Asia via the Northern Sea Route, expected in July.


Until next time on The Snapshot – we’ll be keeping an eye on the markets





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