Wood Mackenzie, energy intelligence group, reports that Europe’s LNG market dynamics as the ones driving the LNG price recovery. Driven by a slowdown in global LNG supply growth, global LNG markets were set to tighten over the next five years.
Conversely, following the recent winter spot price rising in Asia, the European market has been sustaining global LNG prices, making the region the place for global LNG price formation. The title transfer facility (TTF) is currently trading close to $9 per million British thermal units (mmbtu), which is the highest level achieved since mid-2018.
Head of LNG research, Robert Sims, said: “Post-pandemic demand recovery, limitations on Russian pipeline exports and unseasonably cold weather, particularly in April, all contributed to a tighter market, pushing European storage levels down to multi-year lows. But the key dynamic for the price surge has been the strengthening economics of coal-to-gas switching.”
Demand for restocking and coal-to-gas switching economics in Europe will supports their prices through the summer. Market dynamics are expected to relax in 2022. The biggest risk to prices will be European carbon prices. The consultancy firm predicts that prices might soften in 2022, but market fundamentals point towards a further tightening of the global LNG market through to 2025.
With LNG demand in Asia continuing to increase and global LNG supply growth set to slow, competition for Atlantic LNG will intensify, reducing LNG availability to Europe. The global LNG oversupply that has disturbed the market since the end of 2018 has now come to an end, at least until the next wave of post-FID LNG supply comes to market post-2025.
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