The (in)elasticity of the LNG market and its cargos

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The so called ‘Beast from the East’ brought cold temperatures for most of Europe. At the same time technical issues occurred with the Kollsnes gas processing facility in Norway, the BBL interconnection with the mainland and the Segal pipeline. All of this while the Rough storage facility is out of the market because of technical issues.

This perfect storm caused NBP spot prices to reach new record levels of over 200 pence/therm. Within day prices went as high as 350 pence/therm and National Grid has send out a ‘Gas Deficit Warning’ because of a potential shortage of gas. The graph below could have been a chart about Bitcoins but it actually shows the NBP day ahead.

Eventually the market showed that it is working: the high prices (and the warning) limited demand, attracted additional volumes and a shortage was avoided. Because of the outage of Rough it was mainly the LNG short term storage terminals that had so save the day. The advantage of these terminals is that they can respond immediately to market changes from volumes already in the tanks. However, the length of time for which they can do this depends on their storage and how quickly they can attract new cargoes to replenish stocks.

By Bart Verest

See Full article (E&C website)

NOTE: In May E&C Consultants are hosting the third edition of their Transatlantic Energy Conference. Energy buyers can register using the promo code EuropeanGasHub to get a 10% discount. More information and registrations at www.eecc.eu/TEC-Geneva.”

 

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