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Asian spot prices below Britain for first time since 2010

Hydrocarbon Engineering,

Spot gas prices in key Asian markets have fallen below British wholesale levels for the first time since May 2010 amid a global oversupply, ICIS data shows.

The ICIS East India Index (EAX) for March 2015 settled at US$6.85/million Btu on Wednesday, below the British March 2015 hub price of US$6.92/million Btu.

On the same date last year, the EAX March 2015 price stood at US$19.84/million Btu with the British equivalent contract at US$9.90/million Btu.

The ICIS Japan front month spot price was assessed on Wednesday at its lowest level since June 2010, at US$6.875/million Btu.

Ed Cox, editor of ICIS Energy, commented: “A combination of weak winter gas demand across key importing Asian countries, additional global production and lower oil prices have hit market sentiment with spot prices falling fast”.

The ICIS EAX is an average of spot price assessments for Japan, South Korea, Taiwan and China. The assessment reflects the price of LNG imports, which are the dominant form of supply for the first three countries and are increasingly important within China’s gas supply mix.

East Asian spot prices have traded at a big premium to Europe in recent winters amid high weather driven demand, nuclear outages in Japan and higher oil prices. Oil prices directly determine the price of a majority of long term LNG contracts in east Asia on a lagged basis.

British front month gas prices are currently approximately 30% cheaper than at the same time last year. British demand has been lower than usual over the winter because of mild weather and lower consumption from the fuel generation sector.

British gas demand stood at just over 79 billion m3 in 2014, down from over 85 billion m3 in 2013.

LNG imports accounted for approximately 25% of UK gas supply between October 2014 and the start of February. The UK sources most of its gas from domestic production and imports from Norway.

Adapted from a press release by Emma McAleavey.

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