BAKU, Azerbaijan, March 26. European gas and LNG markets are expected to remain highly correlated, as long as Europe remains very exposed to the LNG spot market, Aimie Parpia, Global Head of Research at Six One Commodities, a global energy trading merchant with offices in Stamford, CT, Houston, TX, and Singapore, said, as she was addressing panel discussions during FT Commodities Global Summit, Trend reports.
“I would say that the Asian demand story, from a structural perspective, remains intact. We just haven't tested it recently because we have been pricing to contract demand as far as possible, due to the European story that we've just heard. But the drivers across the region, from South Asia, Southeast Asia to the Far East, are similar to what they have always been. A combination of declining domestic production, increased use of gas in the power sector, coal retirements, delays to nuclear restarts, increased grid connectivity, the list goes on. And across the region, there has been a significant infrastructure build-out in order to support that story. But this demand is only going to come to market in tranches as prices correct with this additional supply that has been mentioned from the sort of next wave of LNG projects,” she said.
Parpia believes that there will need to see correction not only in an absolute sense, but also in relation to the prices of other fuels.
“As we see more supply, we also may see a shift in the kind of demand-pull dynamic that we're in now, where we need to compete, to a more supply-push kind of dynamic. And there are many scenarios in which you will need to test flexible markets such as China to see how much exactly they can absorb. China and Europe have had this kind of complementary relationship, where China has been the balancing factor for when Europe has needed more or less cargoes. And I think as long as that relationship exists, and Europe remains very exposed to the LNG spot market, the European gas and LNG markets will remain highly correlated.