Asia oil and gas may not follow global bearish sentiment
LNG prices have been fluctuating at the end of last week, drawn between bullish impulses stemming from precautionary maintenance at the Freeport LNG facility in Texas and bearish sentiment spurred by the onset of the shoulder season ahead of the Northern Hemisphere summer amid very comfortable fundamentals.
The European TTF gas price rose to more than $9 per million British thermal units (MMBtu) and the Asian spot price to over $9.5/MMBtu across 19-20 March, before declining to $8.5/MMBtu (TTF) and $9.1/MMBtu (Asia) at the time of writing.
However, the overall price sentiment remains net bearish for the coming weeks.
“We also expect some knock-on volatility from oil prices – Brent crude prices jumped from under $82 per barrel on 12 March to over $85 per barrel at the time of writing after Ukrainian drone attacks on a Rosneft refinery in Russia and briefly exceeded $87 per barrel on 19 March,” says the report.
Asia oil and gas
As oil and gas prices have decoupled for most of this year, this could limit the prevailing bearish sentiment in gas markets rather than translate into an outright price increase.
Key demand-side developments include the commencement of spring thermal plant maintenance in Japan, which will reduce gas demand for power generation over the coming weeks.
At the same time, the restart timeline of around 2.27 GW of coal-fired capacity is still unclear – the 1.2 GW Nanao-Ota plant, which was knocked offline during the Ishikawa earthquake on 1 January, and the 1.07 GW Taketoyo coal plant which was taken offline by a fire on 31 January.
As discussed in last week’s note, LNG inventories held by major utilities in Japan are now trending below 2023 levels and some additional purchases may be on the cards to prepare for the onset of summer.
In South Korea, the Ministry of Trade, Industry, and Energy (MOTIE) is expecting a potential oversupply of electricity this spring due to additional solar power generation that could curtail thermal power generation.
The recent increase in spot prices have also resulted in Indian buyers pulling back from the market as offers have turned out higher than expected.
This segment could re-emerge if prices decline to levels of $8 per MMBtu. Rystadenergy.com/
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