LONDON, Sept 16 (Reuters) - UK gas prices will rise towards the end of the year to compete with a tightening liquefied natural gas (LNG) market in Asia, Bank of America Merrill Lynch said on Friday.
With European gas demand on the rise ahead of the winter heating season and Atlantic LNG cargoes being diverted towards Asia, where prices and demand are higher, Europe's gas prices will have to rise in order to compete.
"4Q11 UK gas prices will likely have to rise above the current level of $11 million British thermal units (Btu)in order to compete with Japan and South Korea," the bank said in a research note, adding Asian LNG prices for November delivery were now around $17 per million Btu, a $4-5 premium on Europe.
The global LNG market has tightened on the back of Japan ramping up imports following the nuclear disaster at Fukushima in March, and the market was further tightened through the upcoming maintenance of four Qatargas trains.
Also on Friday, Deutsche Bank said in a research note "the loss of imports to the UK in October, when Qatargas II Train 5 maintenance takes place, may not be softened by contributions from other Qatargas trains, and that the drop in imports will be closer to the full 28 million cubic metres per day."
It added that this scenario could be prevented if the South Hook LNG terminal would absorb the full impact of all maintenance at any train in the Qatargas portfolio, in which case Deutsche Bank said it would "then expect to see fewer cargoes and lower imports through the end of September than we currently believe are scheduled."
* Japan nuclear shortage squeezes LNG market
* Qatargas maintenance also to push up prices
* LNG prices could reach 2008 levels
LONDON, Sept 16 (Reuters) - UK gas prices will rise towards the end of the year to compete with a tightening liquefied natural gas (LNG) market in Asia, Bank of America Merrill Lynch said on Friday.
With European gas demand on the rise ahead of the winter heating season and Atlantic LNG cargoes being diverted towards Asia, where prices and demand are higher, Europe's gas prices will have to rise in order to compete.
"4Q11 UK gas prices will likely have to rise above the current level of $11 million British thermal units (Btu)in order to compete with Japan and South Korea," the bank said in a research note, adding Asian LNG prices for November delivery were now around $17 per million Btu, a $4-5 premium on Europe.
The global LNG market has tightened on the back of Japan ramping up imports following the nuclear disaster at Fukushima in March, and the market was further tightened through the upcoming maintenance of four Qatargas trains.
Also on Friday, Deutsche Bank said in a research note "the loss of imports to the UK in October, when Qatargas II Train 5 maintenance takes place, may not be softened by contributions from other Qatargas trains, and that the drop in imports will be closer to the full 28 million cubic metres per day."
It added that this scenario could be prevented if the South Hook LNG terminal would absorb the full impact of all maintenance at any train in the Qatargas portfolio, in which case Deutsche Bank said it would "then expect to see fewer cargoes and lower imports through the end of September than we currently believe are scheduled." Continued...
