European gas markets are set to benefit from a surge in liquid natural gas (LNG) from Asia over the next few years, helping to allay fears over geopolitical uncertainty emanating from Russia and a welcome boost for European manufacturers.
Asian gas prices have slumped by 60% over the past year due to mild weather and new supplies. The sharp drop in Brent crude prices has also weighed on LNG prices linked to oil. The decline now means that European gas prices, as measured by UK NBP are now higher than Asian LNG for the first time since early 2011.
The trend is likely to continue for some time yet. According to Energy Aspects global LNG supply will increase by 7.3% in 2015 and a further 10.6% in 2016 with new volumes from Australia and the U.S.
The new supplies are also running into a market facing uncertain demand. Japan is considering restarting at least two nuclear reactors shuttered after the Fukushima crisis as early as May this year. This which will lower demand for imported energy such as LNG and may lead to further falls in Asian gas prices, potentially leading to even more supplies heading to Europe.