PERTH (miningweekly.com) – An upsurge in Australian liquefied natural gas (LNG) exports by the end of 2015 was expected to exert downward pressure on Asian spot prices, advisory firm Wood Mackenzie (Woodmac) said this week.
In its new quarterly analysis of global LNG fundamentals, Woodmac said that the softening in Asian LNG spot prices would find temporary relief in the summer months, with demand growth in the Pacific outpacing that of global LNG supply.
However, new Australian LNG supply would push LNG prices down when production ramped up by the end of the year.
Woodmac principal European gas analyst Massimo Di-Odoardo said that for the first time since 2009, Asian LNG spot prices were trading at a discount to European spot prices.
“Benign weather conditions in North East Asia and ample supply availability, combined with low oil prices continues to put pressure on Asian LNG prices. In contrast, high seasonal demand and the cap imposed on Groningen production for the first half of 2015 are resulting in European spot prices trading relatively high and close to oil indexed contract prices, despite abundant LNG imports.”
However, Di-Odoardo warned that a typical summer price decline was not assured, and that instead Asian LNG and European spot price levels would be sustained through the summer.
Furthermore, rising winter prices were also not assured, with Di-Odoardo saying that instead prices in the fourth quarter would fall, despite the beginning of the winter season.
“The restart of some nuclear capacity in Japan and the commissioning of new nuclear and coal capacity in South Korea will result in lower demand in 2015. However, under normal weather conditions we expect more LNG demand in China, while the ramp-up of new contracts and more regasification capacity will facilitate new demand in South East Asia, India and the Middle East,” said Woodmac Asia LNG research analyst Yingying Zhou.
“Overall, we expect Asia Pacific LNG demand to be some six-million tonnes higher in 2015, compared to last year, despite the first quarter being lower.”