Natural gas prices have come off their highs by 9.5 percent overnight. The prices were trading at a seven-year high for the US markets and at all-time highs for Europe and Asia. So, there is some respite coming in.
That is major because of the statement from Russian President Vladimir Putin. He said that they will increase more supplies of gas to the European Union (EU). The president also said that it has been the policies or the policy shifts in Europe that have led to supply squeeze and keeps the EU vulnerable to more of those kinds.
So, while there has been a 10 percent decline in the case of natural gas overnight, the fact is that there have been 600 percent gains in the case of natural gas in Europe in this year itself.
EU imports nearly 90 percent of its gas requirements and its dependence on the international market is still high. Europe inventories at 76 percent of capacity are still at a decade low. So, the prices are expected to keep on the higher side of the range.
Looking at the Asian markets, yesterday the liquefied natural gas (LNG) prices gained up by 40 percent to an all-time high of $56 per mmbtu. The Asian gas prices have also increased by 500 percent this year and the markets are still looking at stronger demand in the winter season.
Asia accounts for 70 percent of LNG imports and 20 percent of this import or requirement comes in from India, Pakistan, Bangladesh. The fact that these countries have lower gas capacities and lower gas inventories, the markets do believe that the correction that is being seen in natural gas perhaps would be very short-lived and one could see some buying at these levels.
Watch the accompanying video of CNBC-TV18’s Manisha Gupta for more details.