Carbon Prices Drive Up TTF, Asian LNG: Timera
Higher European carbon prices are driving up not just gas prices locally, but also spot LNG prices, argues London-based consultancy Timera Energy in its blog posted September 17.
Carbon prices topped €25 ($29) per metric ton last Monday, 142% higher than in April 2018 when they were €13/t, after the European Union implemented a cull in the number of overall tradable EU emission permits (EUAs) in circulation. Netherlands TTF gas prices and Asian spot LNG prices have risen in parallel with carbon since Q1, adds Timera, but they also fell in sympathy with a steep decline in EU carbon prices last week. This linkage is underpinned by gas versus coal plant switching in European power markets, especially Germany.
Asian spot prices must rise with TTF in order to maintain a wide enough price premium to keep cargoes being diverted from Europe to meet Asian demand, Timera argues. Its blog can be read in full here.
Europe’s future requirement to use more gas to replace coal in power generation – and its rising gas import dependency - may mean it becomes less of a “last resort for LNG” and more of a destination in its own right, argues consultancy Wood Mackenzie September 17. In the last seven years, import dependency has jumped 30bn m3/yr, and that by 2025 Europe will require an additional 79bn m3/yr of imports versus 2018 – comparable to the size of Europe's largest gas market Germany, said WoodMac adding: “Global LNG supply growth over the next few years will mitigate Europe's lack of supply flexibility but the market will tighten again. If a subsequent wave of LNG supply does not progress, competition in the global LNG market will intensify."