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Wood Mackenzie winter gas demand: Asia Pacific

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LNG Industry,

Wood Mackenzie has released its forecast of winter 2014/15 gas demand.

It expects the Asia Pacific LNG market to continue to loosen throughout the season. 

Gavin Thompson, Head of Asia Pacific Gas and Power Research for Wood Mackenzie explains: “Based on normalised weather patterns, the Asia Pacific LNG spot market should continue to loosen this winter. This inevitably will favour buyers. This is a reversal of the defining feature of the last several years in which the market continued to tighten. It turned in favour of buyers in summer this year, with the growth of Pacific LNG supply outpacing that of demand. Assuming normal winter weather patterns in the region from October to March, we expect that trend to continue this winter too." 

"Storage inventory levels remain high, due primarily to mild weather through the past year. We now forecast that Pacific LNG imports will only grow by a modest 1 million t during the traditional peak winter season. LNG supply from within the region, on the other hand, will be 3 [million t] higher this winter than last mainly due to new volumes from PNG LNG, with minimal supply disruptions expected. Due to this comfortable demand-supply outlook, we expect Pacific LNG prices to be notably softer compared to the same period last year. With global oil prices also expected to remain soft through this period, LNG prices will struggle to match previous year highs".

Weather poses biggest threat

However, Wood Mackenzie believes that a cold winter poses the biggest uncontrollable risk to the global gas and LNG market.

Wood Mackenzie defines a cold winter as monthly temperatures being 2ºC below average for December to February inclusive.

Noel Tomnay, Head of Global Gas Research for Wood Mackenzie, said: “Our estimates suggest that colder temperatures in Northeast Asia could increase Pacific LNG demand by 7 [million t], requiring additional sources of supply. Most of this additional demand would need to be served by increased diversions from Europe, as Asia will struggle to access sufficient Pacific LNG supply. This has the potential to transform a currently loosening market into the tightest Pacific market we’ve seen yet. With growing regasification capacity in north China supporting higher Asian winter LNG demand potential, this is now a risk that is getting bigger."

Mr Tomnay also explains the potential impact on global gas markets: “This is about cause and effect; higher winter demand for LNG in Asia will lower LNG imports in Europe.  However, North West Europe has insufficient storage inventories to cope with a cold winter in both Europe and Asia, thus forcing it into a greater reliance on Russian gas. But any disruption of Russian gas supply to Europe via Ukraine, would increase pressure on European buyers to secure additional LNG to minimise demand losses. Cold winter weather in both Asia and Europe, combined with Ukraine transit disruption, would create 12 million metric t of additional LNG demand, 5 million metric t of it in Europe.  Such a ‘perfect storm’, combined with limited global LNG supply availability would mean some of that demand, including in Asia, would not be met."

Adapted from press release by

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