LNG Market Dynamics in 2015 Significantly Different from Other Years, Says Analysts

European prices topped Asia as the world’s premium after 6 years, but a series of factors suggest that after a summer of lower prices in Europe, new Australian LNG supplies will bring Asian spot prices back to European spot prices.

This is one of the messages of the last report by Wood Mackenzie. 

“For the first time since 2009, Asian LNG spot prices are trading at a discount to European spot prices, like the NBP” Massimo Di-Odoardo, Principal European gas analyst for Wood Mackenzie, said in a note released on Tuesday.

The analysts added that future market dynamics’ could be substantially different with respect to previous years.

‘Di-Odoardo warns that a typical summer price decline is not assured, that instead Asian LNG and European spot price levels will be sustained through this summer.  And, further, that rising winter prices are also not assured, and that instead prices in Q4 will fall, despite the beginning of the winter season.’

Meanwhile, Europe will continue relying on Russia.

“The subsequent high storage injection requirement will result in a growing call on Russian gas through the summer, at a time of reduced LNG imports, a consequence of higher LNG requirements in Asia, resulting in the US$7/mmbtu price floor to 'hold'. However in Q4, the combination of low prices and upward flexibility on Russian contract gas is expected to push prices below US$7, despite sustained coal to gas switching in the UK.”