SINGAPORE — Natural gas prices in Asia hit a document excessive final week and can probably go down from right here, based on political danger consultancy Eurasia Group.
“We’ve heard single cargos indeed sell in the high $30s, I heard one at $39 [per million British thermal units],” stated Henning Gloystein, director of power, local weather and sources at Eurasia. That degree looks as if the “high mark” for prices and the height, he stated.
According to S&P Global Platts, the benchmark Japan-Korea-Marker (JKM) spot worth for liquefied pure gas in February reached a document excessive of $32.49 MMBtu final week. Natural gas demand for heating soared after a chilly spell gripped North Asia, the report stated.
The leap in prices has been “pretty extreme,” however will not final for much longer because the chilly season is ending and demand for heating will fall, Gloystein informed CNBC’s “Squawk Box Asia” on Monday.
“At some point, of course, it will get a little bit warmer,” he stated. “Prices for February and March will probably come down because … the winter will end for sure.”
“This is probably the peak of the spike,” he added.
The liquefied pure gas (LNG) cargo ship Cygnus Passage from Russia berths at an LNG terminal operated by China Petrochemical Corporation (Sinopec Group) on January 7, 2021 in Tianjin, China.
VCG | Visual China Group | Getty Images
Natural gas prices in Asia fell to a document low in the second quarter of final 12 months when the coronavirus disaster unfold, however they have surged greater than 1,000% since July.
Gloystein stated the chilly climate and a few provide outages have performed a component in that surge, however one “big overlooked factor” is the huge variety of households in China that switched from coal to pure gas final 12 months.
More than 10 million households in China had been estimated to have moved from coal to pure gas for heating their houses, he stated. The majority of these transitions occurred in the final quarter of 2020, simply earlier than winter arrived, he stated.
“Then it did get really cold, and suddenly they had to serve all this new demand which, by some estimates, it will be the equivalent of moving all of Australia’s households to another fuel within a single year,” Gloystein stated.
Utilities and power corporations didn’t have sufficient storage to organize for such an enormous enhance in demand, he added. As a consequence, demand outstripped provide and drove prices to a document excessive.
Gloystein stated corporations often construct up storage through the summer season and use it up in the winter, topping up as wanted. This time, nonetheless, China abruptly needed to buy extra gas for brand spanking new clients at “literally whatever price, and no one was prepared for that in the market.”
Still, the development of switching away from coal to gas will probably proceed, he added.
“This gasification program and the move to cleaner fuels in China will remain in place, without a doubt,” he stated.