US LNG Supply Increases Cause Short-Term Plunge... Still Over 4 Times Higher Compared to Early Year
[Asia Economy Reporter Park Byung-hee] European natural gas prices have halved in 10 days. This is due to increased supply of U.S. liquefied natural gas (LNG) and a weakening cold wave. However, prices still remain more than four times higher than at the beginning of the year.
According to major foreign media on the 30th (local time), the natural gas futures price at the Netherlands TTF exchange, the benchmark for European natural gas, fell sharply by up to 12% to 84.90 euros per megawatt-hour (MWh). This is a drop of more than 50% compared to the record high of 180 euros recorded on the 21st.
However, compared to the beginning of the year when prices were below 20 euros per MWh, natural gas prices are still more than four times higher.
Wholesale natural gas prices in the UK also fell 10% that day to 210 pence per therm (a unit of heat). The UK natural gas price also dropped more than 50% compared to the record high of 450 pence last week.
Alex Froley, an analyst at consulting firm ICIS, explained, "Natural gas prices are falling due to milder weather and increased LNG supply." He added, "A U.S. LNG tanker that was heading to China changed course that day and is now heading to the Netherlands."
As Froley explained, as European natural gas prices soared recently, cases of U.S. LNG tankers that were heading to Asia changing direction to Europe are increasing.
Kashual Ramesh, senior analyst at Rystad Energy, said, "At least 11 vessels carrying 800,000 tons of LNG have changed course from Asia to Europe," adding, "Thanks to this, the European natural gas market has somewhat restored supply-demand balance."
However, there are also opinions that it is too early to judge that the natural gas market has stabilized.
Analyst Ramesh said, "The increase in European supply due to LNG tankers changing routes is only a temporary measure," and "It cannot replace stable gas supply through pipelines."
He pointed out that the tense relationship between Russia, the largest supplier of European natural gas, and the West must be resolved quickly. Russia supplies more than one-third of Europe's natural gas consumption.
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