Japan, Emerging Markets Pushing Gas Price Higher, Bernstein Says

Demand for liquefied natural gas from Japan and emerging economies will support gas prices around the current “high” levels in Asia and in Europe, according to Sanford C. Bernstein & Co.

Spot LNG prices in February increased to $20 per million British thermal units for cargoes delivered to northeast Asia and $12 per million Btu in Europe as buyers from both regions competed for cargoes, Neil Beveridge, a Hong-Kong based analyst at the company said in a report e-mailed today. LNG supply dropped 0.9 percent in 2012, the first decline in two decades, to 236 million metric tons because of limited capacity additions, supply disruptions and declining Indonesian production, according to Bernstein.

“Global LNG markets remain extremely tight and will likely remain so this year as supply fails to keep pace with demand,” Beveridge said. “High spot LNG and gas prices in Europe and Asia are likely to persist in the near-term.”

The bulk of Japan’s nuclear reactors are still shut and may remain so for the rest of 2013, providing strong demand for LNG for thermal power generation, according to Bernstein. New receiving terminals starting in China, India, Singapore and Malaysia will provide a “robust” need for LNG, Beveridge said.

Natural gas supply will recover by 2017 as new liquefaction capacity of 90 million tons a year starts, Beveridge said. This would create a spare 60 million tons a year of LNG capacity, or about 18 percent of the global total, which may push spot prices in Europe and Asia lower, he said. A deficit may emerge in 2018 to 2020, according to Beveridge.

LNG cargoes for delivery in four to eight weeks cost $17 per million British thermal units in Northeast Asia, research company Energy Intelligence said March 7 on the website for its World Gas Intelligence publication.

To contact the reporter on this story: Chou Hui Hong in Singapore at chong43@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

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