Natural gas costs in Asia might have peaked after current highs: Eurasia

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Natural gas prices in Asia may have peaked after recent highs: Eurasia

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SINGAPORE — Natural gas costs in Asia struck a record high recently and will likely decrease from here, according to political threat consultancy Eurasia Group.

“We’ve heard single freights certainly offer in the high $30s, I heard one at $39 [per million British thermal units],” stated Henning Gloystein, director of energy, environment and resources at Eurasia. That level looks like the “high mark” for costs and the peak, he stated.

According to S&P Global Platts, the criteria Japan-Korea-Marker (JKM) area rate for melted gas in February reached a record high of $32.49 MMBtu recently. Natural gas need for heating skyrocketed after a cold spell grasped North Asia, the report stated.

The dive in costs has actually been “pretty extreme,” however will not last a lot longer as the winter season is ending and need 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 included.

The melted gas (LNG) freight ship Cygnus Passage from Russia berths at an LNG terminal run by China Petrochemical Corporation (Sinopec Group) on January 7, 2021 in Tianjin, China.

VCG | Visual China Group | Getty Images

Natural gas costs in Asia was up to a record low in the 2nd quarter of in 2015 when the coronavirus crisis spread, however they have actually risen more than 1,000% given that July.

Gloystein stated the winter and some supply failures have actually played a part because rise, however one “big overlooked factor” is the large variety of families in China that changed from coal to gas in 2015.

More than 10 million families in China were approximated to have actually moved from coal to gas for warming their houses, he stated. The bulk of those shifts occurred in the last quarter of 2020, prior to winter season showed up, he stated.

This gasification program and the relocate to cleaner fuels in China will stay in location, without a doubt.

Henning Gloystein

Eurasia Group

“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 energy business did not have adequate storage to get ready for such a huge boost in need, he included. As an outcome, need overtook supply and drove costs to a record high.

Gloystein stated business normally develop storage throughout the summer season and utilize it up in the winter season, topping up as required. This time, nevertheless, China unexpectedly needed to acquire more gas for brand-new consumers at “literally whatever price, and no one was prepared for that in the market.”

Still, the pattern of changing far from coal to gas will likely continue, he included.

“This gasification program and the move to cleaner fuels in China will remain in place, without a doubt,” he stated.

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