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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Natural Gas Deficit Causes Prices To Soar

Natural gas prices are rising across Europe and Asia due to tighter supply of the commodity, lower production in Europe, and lower exports from Russia, the Financial Times reports, noting the supply crunch may intensify in the coming weeks.

In Europe, the report notes, prices for natural gas have hit 40 euros per mWh for the first time ever, with UK gas prices at the highest in 16 years. This is equal to approximately $14 per million British thermal units. In Asia, gas prices have hit $15 per mmBtu.

The price situation may worsen still, according to analysts.

“If anything it’s surprising there hasn’t been more concern,” Tom Marzec-Manser at ICIS told the FT. “In terms of additional supply there aren’t many options on the table globally. Russia is really the only discretionary source of supplies out there but we don’t know when additional deliveries might start. So traders around the world, from Japan to Brazil, are starting to watch European prices too.”

Demand for natural gas has been on a strong rebound globally. And the economic recovery has not been the only factor. In Brazil, for instance, LNG imports hit the highest ever because droughts have reduced the country’s hydropower capacity, according to the FT. in Europe, the long winter emptied gas storage facilities, and they have yet to be replenished. In Asia, the strong economic recovery has coupled with a seasonal peak in demand during the summer to push prices higher still.

For some, this has been good news: U.S. exports of liquefied natural gas reached a record high during the first half of the year, at an average of 9.6 billion cu ft daily. Asia remained the top destination for U.S. LNG exports from January through May in 2021, accounting for 46 percent, the EIA has estimated. Asia was followed by Europe with a 37-percent share of American LNG exports. 

By Irina Slav for Oilprice.com

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  • Mamdouh Salameh on July 30 2021 said:
    Why the surprise about rising natural gas prices? The long-term trajectory for gas prices is steeply upward for the simple reason that natural gas is the pivot for global energy transition without which the transition won’t succeed.

    The reported lower gas exports to Europe from Russia underscore the importance of Russia to the EU’s energy needs and security, need for the Nord Stream 2 gas pipeline and the fact that the EU governments have no influence on Russia over gas prices since it can easily switch its gas supplies from the EU to the Chinese market.

    Once the Europeans grasped these implications, they will be in a better position to understand the fallacy of the United States’ claim that its sanctions against the Nord Stream 2 pipeline are motivated by its concern about Europe’s energy security. The rising gas prices should underscore the fact that rather than tightening Russia’s grip on Europe energy security, the Nord Stream 2 ensures ample gas supplies and security to Europe.

    Still, some gas producers around the world will benefit handsomely from the rising gas prices prominent among them Qatar, Russia and the United States.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • George Doolittle on July 30 2021 said:
    A long way back to $15 us dollars a million cubic as was true in 2008 no doubt.

    The low from that price was basically "free" so yepper... definitely not at that price either no doubt.

    Still...was only free just one Year ago with the USA now the World's biggest exporter of lng and obviously not some worthless clownie place in the Levant let alone Australia which has ahem *mere trillions* ahem in sunk capital all in lng, steel, piping, railroad, mining, shipping...none of that paid for, none of that properly accounted for, all backed by worthless Aussie bucks and a collapsing Chinese economy. Oh and all in need of ahem "mere trillion US Dollar upgrades" ahem just as sustainment costs.

    So yeah absolutely bullish on natural gas prices in the USA going back to Moon no doubt and absolutely yes due to all this period no doubt unquestionably etc etc

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