ELS #Energy - Are lower overseas gas prices a sign of hope in the face of supply shocks at home?

Since end-December, the Yamal pipeline, which carries one sixth of Russian natural gas imports to Europe, has been sending gas out of Germany and towards Poland, as Europe chose to rely on storage rather than paying exorbitant market prices for gas. While Europe and the USA are taking steps to secure alternative sources such as Qatar, European gas buyers may do well to look beyond their usual energy markets for better price opportunities.

The Northeast Asia spot LNG price is significantly lower than the Rotterdam TTF, the benchmark spot price for piped natural gas in continental Europe, for the first time since March 2018. Both TTF and Northeast Asia LNG have been at record high prices since October 2021. Asian LNG was briefly cheaper in December when the price of piped gas in Rotterdam skyrocketed. But, for the entire last week of January, it has been up to 25% cheaper than TTF gas.

The Asian benchmark has been 14% higher on average than the Dutch one since 2010, spiking to 300% higher in January 2021 when cold winters and low supply led to high prices in both Asia and North America. Normally, shipping LNG is more expensive than drawing it straight from a gas pipeline, so the current low Asian LNG prices should be good news for Europe in crisis. However, the volumes traded on the Asian exchanges are nowhere near what will be needed in the event of a real Russian gas shutoff. Although cheaper American, Australian and Qatari volumes could likely be secured, they are not nearly enough and will quickly rocket in price as soon as a crisis sets in.

#energy #energypolicy #gas #energyprices

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