Latest Update: Monday18/4/2011April, 2011,
Reuters/London/Doha
Wholesale British gas prices are likely to rise tomorrow after top liquefied natural gas exporter Qatar agreed to send more than 60 extra cargoes to Japan, but price increases in the world’s benchmark gas market should be dampened by plentiful supply.
The deal by Qatar, the world’s top LNG producer, to sell Japan an extra 4mn tonnes of the fuel over the next 12 months means there will be less gas coming to Europe than was likely before Japan’s nuclear crisis.
British gas prices surged in the week after the March 11 quake and tsunami that wrecked one of Japan’s biggest nuclear power plants on concern that large volumes of LNG might be diverted to Japan, already the world’s top importer.
A flurry of LNG ships arrived in Britain in the weeks after the quake but the number heading to the UK has shrunk over the last week.
Prices in the benchmark UK NBP market have fallen from their post-quake highs on expectations Qatari LNG supplies will remain plentiful. Qatar has started up two huge new production facilities, known as trains, in the last six months, swelling its LNG capacity to 77mn tonnes per year.
But Saturday’s confirmation that more than half the output of one of those new trains will head for Japan rather than Europe is likely to push prices higher again this week.
“The news will add to the bullish end to the week, which saw the Winter 2011 contract firm 1.8% from the open on the back of stronger oil and general profit taking after a relatively soft week,” Nick Campbell, a UK gas market analyst at consultants Inenco, said.
“This could see a ‘short squeeze’ where some participants buy the contract in order to push the market higher on what is, at first glance, relatively bullish news. If, however, we analyse the data in greater detail, (Qatar) was still seeking buyers for its new trains and therefore had spare capacity to sell to the Japanese.”
The new trains, each able to produce 7.8mn tonnes a year of LNG were ordered before the unconventional gas production boom priced most LNG out of the US market, should ensure Europe remains well supplied.
“Qatar could have offered almost any amount, given the amount it now has available. It was more a question of what the Japanese needed,” independent consultant Andrew Flower said.
Flower expected Japan to need around 6mn tonnes a year more LNG as a result of the loss of its nuclear power capacity but believed it would source some from other suppliers.
“They (Qatar) will probably still send more to Europe compared to what they sent in 2010, because they have more to send. But it will be less than it would have been without the Japanese crisis.”
Any UK gas price rises that may come in response to lower-than-expected LNG supply are also likely to hit a ceiling of oil-indexed European gas supply contracts prices.
Unlike Britain, where wholesale gas prices are largely dictated by supply and demand, most European gas is delivered under long-term contracts linked to the price of oil.
Surging oil prices over the last year have made those supplies, mainly from Russia, much more expensive, prompting European buyers to import record amounts of gas from Britain through a pipeline link with Belgium.
If the gap between British and oil-indexed gas prices closes, traders will likely switch to selling gas to the UK, keeping a cap on prices, Campbell said.
Moreover, coal may recover some of its advantage against gas in the winter. At current market prices, coal is likely to be the power generation fuel of choice next winter, as it was the usual case until UK winter gas prices were lower than usual due to heavy LNG imports.
Source: http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=428902&version=1&template_id=48&parent_id=28
Reuters/London/Doha
Wholesale British gas prices are likely to rise tomorrow after top liquefied natural gas exporter Qatar agreed to send more than 60 extra cargoes to Japan, but price increases in the world’s benchmark gas market should be dampened by plentiful supply.
The deal by Qatar, the world’s top LNG producer, to sell Japan an extra 4mn tonnes of the fuel over the next 12 months means there will be less gas coming to Europe than was likely before Japan’s nuclear crisis.
British gas prices surged in the week after the March 11 quake and tsunami that wrecked one of Japan’s biggest nuclear power plants on concern that large volumes of LNG might be diverted to Japan, already the world’s top importer.
A flurry of LNG ships arrived in Britain in the weeks after the quake but the number heading to the UK has shrunk over the last week.
Prices in the benchmark UK NBP market have fallen from their post-quake highs on expectations Qatari LNG supplies will remain plentiful. Qatar has started up two huge new production facilities, known as trains, in the last six months, swelling its LNG capacity to 77mn tonnes per year.
But Saturday’s confirmation that more than half the output of one of those new trains will head for Japan rather than Europe is likely to push prices higher again this week.
“The news will add to the bullish end to the week, which saw the Winter 2011 contract firm 1.8% from the open on the back of stronger oil and general profit taking after a relatively soft week,” Nick Campbell, a UK gas market analyst at consultants Inenco, said.
“This could see a ‘short squeeze’ where some participants buy the contract in order to push the market higher on what is, at first glance, relatively bullish news. If, however, we analyse the data in greater detail, (Qatar) was still seeking buyers for its new trains and therefore had spare capacity to sell to the Japanese.”
The new trains, each able to produce 7.8mn tonnes a year of LNG were ordered before the unconventional gas production boom priced most LNG out of the US market, should ensure Europe remains well supplied.
“Qatar could have offered almost any amount, given the amount it now has available. It was more a question of what the Japanese needed,” independent consultant Andrew Flower said.
Flower expected Japan to need around 6mn tonnes a year more LNG as a result of the loss of its nuclear power capacity but believed it would source some from other suppliers.
“They (Qatar) will probably still send more to Europe compared to what they sent in 2010, because they have more to send. But it will be less than it would have been without the Japanese crisis.”
Any UK gas price rises that may come in response to lower-than-expected LNG supply are also likely to hit a ceiling of oil-indexed European gas supply contracts prices.
Unlike Britain, where wholesale gas prices are largely dictated by supply and demand, most European gas is delivered under long-term contracts linked to the price of oil.
Surging oil prices over the last year have made those supplies, mainly from Russia, much more expensive, prompting European buyers to import record amounts of gas from Britain through a pipeline link with Belgium.
If the gap between British and oil-indexed gas prices closes, traders will likely switch to selling gas to the UK, keeping a cap on prices, Campbell said.
Moreover, coal may recover some of its advantage against gas in the winter. At current market prices, coal is likely to be the power generation fuel of choice next winter, as it was the usual case until UK winter gas prices were lower than usual due to heavy LNG imports.
Source: http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=428902&version=1&template_id=48&parent_id=28
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