Natural Gas Market Update – February 2014

In the past few months, US natural gas prices have staged some gravity defying movements, fuelled by unusually strong heating demand from the most extreme winter conditions affecting the US in about a quarter of the century.

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  • In the past few months, US natural gas prices have staged some gravity defying movements, fuelled by unusually strong heating demand from the most extreme winter conditions affecting the US in about a quarter of the century.
  • In contrast to the punishing cold of US winter, the milder winter conditions experienced by UK and most parts of Western Europe have helped to keep European prices contained.
  • The recent crisis in Ukraine has sparked concerns of a widespread natural gas supply disruption in Europe but risks of it happening appear low at the moment. In the event that it does, the current elevated levels of European gas inventories should act as a cushion against any immediate supply shocks.
  • LNG prices in Asia Pacific scaled new heights of above US$20 per mmBtu in February from the lack of spot cargo and strong stockpiling demand ahead of peak summer cooling period.
  • The scope for Australian LNG exporters to profit from the current high Asian prices may diminish gradually in the long-run against a landscape of rising global supply competition. In the near-term,Australiastill enjoys the privilege of being the main supplier to clients in the Asian region. However, the need for more nimble contracts and looming competition from US exporters are likely to threaten future profitability of Australian exporters.

For further analysis download the full report.