– In Asia, the average price of gas imports to Japan has risen since year-end 2017 in step with the uptrend in the oil price. LNG spot prices are under pressure and approaching those of oil-indexed contracts.
– These conditions have affected the European market, where price levels for Q2 and Q3 are relatively high.
– In the U.S., the Henry Hub price was lower in Q2 than Q1, due to the magnitude of U.S. natural gas output.
Globally, based on current information, average 2018 prices look to be up sharply in Europe (+36%) and Asia (+30-40%), but down in the United States (-3%).
Figure 1: 2017-19 gas price, by quarter: United Kingdom, Japan and the United States ($/MBtu and €/MWh)
Gas prices rose in Q1, mainly owing to a harsh winter (Fig. 1). Since then, they have declined, as is usually the case in spring and summer. The gas prices in Europe and Japan should be higher this year than last year, due to the uptrend in the oil price and its impact on Asian oil-indexed contracts and winter spot prices. For this summer, the increase in the CO2 price in Europe (+110% in one year) has created a higher reference for the gas price. These trends do not pertain to the U.S. market, where the price has tended to remain stable or fall.
Fig. 1: Gas price, by quarter: U.K., Japan and the U.S. ($/MBtu and €/MWh)
Out of the 8.3 Mt of US LNG exports recorded in the first 8 months of 2017, 2.37 Mt was exported to the North East Asian countries (29%). This represents a remarkable development given the fact that the US did not send any cargo to North East Asia in 2016.
On average, US LNG has turned out to be the most expensive LNG supply source in the region, priced 18% above the average regional LNG import cost. However, a country by country analysis shows that the US LNG was indeed priced close to the average price of LNG imports for China and even lower for South Korea and Taiwan. Japan is the only country in the region which pays a price for US LNG well above both its average cost of imports ($12.26 vs $8.04, a 52% extra-cost) and regional spot price indexes.