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Will This Troubled Buyer Save The World Natgas Market?

I discussed last month how natural gas supply problems have been hitting Europe of late. And based on reports this week, it seems those issues may be deeper than originally expected.

Platts reports that Europe has lately become the world’s go-to natgas market. With prices for the commodity on the continent actually flipping to a premium over other big buyers like Asia.

That trend began in mid-February. When natgas prices at the U.K. National Balancing Point (NBP) hub climbed higher than the so-called JKM (Japan-Korea Marker) price for liquefied natural gas being shipping into these Asian countries. Related: A New Season Brings Big Changes In Energy

And over the past month, the gap between European and Asian natgas prices has widened. With NBP gas currently selling for a premium of $0.40 per MMBtu.

That’s a major shift — given that Japan-Korea LNG used to be the world’s premier sales outlet for natgas. In the wake of the Fukushima nuclear shutdown, for example, JKM marker prices climbed to $20 per MMBtu. Making this by far the best place around the globe to sell gas. Related: This Week In Energy: LNG Could Be 2015’s Big Winner

But the JKM marker price has been steadily eroding over the past year. To the point where April LNG deliveries here are now going for just $7.29 per MMBtu — a price decline of 60%, year-on-year.

That weakness has allowed the critical crossover in European and Asian prices noted above. Especially in light of recent supply restrictions at Europe’s largest natgas field — Groningen in the Netherlands. Related: Could Natural Gas Be A Better Bet Than Oil?

The loss of output from this massive field appears to be driving European prices to some of the highest levels in the world at the moment. A fact that is reportedly causing LNG supplies to be diverted to this market — in effect, helping put a floor on the global natgas market.

This should help stem the declines we’ve seen of late in Asian LNG prices. And the global natgas market could actually see more upward pressure, as South American LNG buyers are reportedly beginning to bid aggressively against Europe’s consumers.

Watch for better prices here, coming soon.

Here’s to being the buyer of choice,
Dave Forest

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