Liquid Natural Gas prices are high, and will remain so. The costly “Salvation” of the EU
In just one year, the global liquefied natural gas (LNG) market has transformed from a buyer-driven market to a seller-controlled market, with LNG suppliers commanding a tight market as buyers rush to secure gas. from suppliers other than Russia. There is little supply and even prices on long-term contracts are approaching the high spot prices for this product.
The European Union 's goal of diversifying gas supplies, accelerating the introduction of less polluted methane and replacing gas in heating and power generation with Russian gas has created a very competitive global framework for LG's spot supply. . In this supply rush, Europe is beating Asia, previously the largest market for this product. All this even before the outbreak of the war in Ukraine, due to the energy crisis and the explosion of prices after Covid-19.
The Russian war in Ukraine and the EU's determination to reduce its dependence on Russian gas – to around 40% before the war – further made Europe the preferred destination for spot LNG cargoes, especially cargoes from states. United.
Spot supply will not be able to meet current needs or replace much of the Russian supply because more than half of global LNG trade is contracted under long-term agreements, leaving fewer spot cargoes with flexible destination terms. .
Buyers are also now looking to sign long-term contracts for the supply of LNG. It is also a way to protect yourself from skyrocketing spot prices, but right now the sellers are in charge, because supply is scarce and will be until, in the mid-1920s, new production capacities are available from Qatar and from the USA.
Major LNG suppliers are now offering buyers 10-year forward contracts with a start date in 2023 at rates 75% higher than those for similar deals agreed last year alone, Bloomberg says.
The price of long-term contracts is generally tied to the price of oil or Henry Hub prices and is below spot LNG prices, now nearing record highs. Unfortunately with demand skyrocketing as Europe rushes to replace Russia, the gap between long-term and spot LNG prices is narrowing.
“There is anecdotal support – through industry channel controls – of the increased appetite and discussions by European and Asian LNG buyers in recent weeks, seeking to secure long-term LNG volumes and equity. in LNG projects, ”Saul Kavonic, Head of Australia Integrated Energy and Resources Securities Research at Credit Suisse, said Nick Toscano of the Sydney Morning Herald at the end of March.
The Russian war in Ukraine and the West's determination to wean Russian gas sooner rather than later are "the most structural bullish event" in the history of the global LNG market, Kavonic said.
According to the Credit Suisse analyst, the war in Ukraine and its consequences on global gas flows would eclipse the previous major market shift and increased demand for LNG caused by the closure of Japan's nuclear power plants following the Fukushima disaster. in 2011.
"Ukraine could have more than 10 times the impact of Fukushima and last much longer," Kavonic told the Sydney Morning Herald.
For example, Germany, which until two months ago had only sporadically thought about LNG import and import terminals, is now seeking a long-term agreement with one of the world's leading LNG exporters, Qatar.
The global LNG procurement rush is bullish for US developers and exporters, but with facilities at full capacity, the US can do little more in the short term to ease the tight market. In the long run, environmental concerns about greenhouse gas emissions from the LNG supply chain, from fracking to methane leaks, could place a limit on how much LNG America will be able to send to Europe in a decade or two. from now. This will drive prices up even more.
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The article The prices of liquid natural gas are high, and will remain so. The costly "Salvation" of the EU comes from ScenariEconomici.it .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/i-prezzi-del-gas-naturale-liquido-sono-alti-e-tali-resteranno-la-costosa-salvezza-della-ue/ on Mon, 25 Apr 2022 10:00:21 +0000.