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ENG: PVB second-quarter 2018 falls

06 Mar 2018 19:09 GMT
ENG: PVB second-quarter 2018 falls

London, 6 March (Argus) — The PVB second-quarter 2018 market edged lower on Tuesday, but remained close to expected oil-indexed prices.

Spain could need strong imports from Algeria and northwest Europe this summer, especially with northeast Asian near-curve LNG prices above the PVB.

The PVB second-quarter 2018 market has moved slightly below oil-indexed prices, assuming a 10pc discount, which could discourage maximising Algerian pipeline deliveries.

But there was an incentive for slightly higher flows than the first half of last summer when the PVB second-quarter 2017 market was at a wider discount to the cost of crude-linked supply this time last year.

And Algeria is planning to increase exports to Europe this year, which would require higher deliveries to Spain, Italy or France whether via pipeline or LNG.

Algerian pipeline gas was in close competition with LNG last summer. But global LNG prices for delivery next month were still above the PVB second-quarter 2018 market.

European LNG sendout climbed to its highest since 2012 last year, driven by strong Iberian and Italian receipts.

And a scheduled increase in global liquefaction capacity could leave more supply available for southern Europe, although much of this could be offset by higher demand from parts of Asia and the Middle East.

Chinese demand in particular could climb further at the start of summer, while new import capacity scheduled to start-up in Pakistan and Bangladesh could also draw supply away from Europe, even as Egyptian demand falls.

And the shutdown of Papua New Guinea's LNG plant after an earthquake on 26 February could continue to curb supply until the start of May.

LNG deliveries to Spain are expected to be below average this month, and Enagas' April schedule shows stocks at two of the country's six terminals will fall to the technical minimum by the end of next month. This could increase demand for imports in May just to replenish stocks.

The backwardation of global LNG prices could encourage running down inventories as much as possible over the next couple of months before replenishing stocks later.

The PVB second-quarter 2018 contract was at a tight discount to ANEA prices for May cargoes, which could encourage deliveries of west African and US cargoes to Spain.

But gas in northwest Europe was still on track to be the cheapest source of supply, although the region may not have much spare gas to offload because of strong injection demand.

Northwest European stocks have fallen to the lowest in recent years after last week's cold spell, when Norwegian and UK constraints also lifted the call on storage.

Brisk German withdrawals were needed to meet strong demand across the region, pulling stocks to a five-year low. And northern French stocks could be depleted by the end of winter, while new French storage rules could lift injection demand this summer well above previous years.

The continental stockbuild will have to be the highest in recent years even to lift inventories close to average by the start of next winter, with some Dutch sites requiring injections close to maximum capacity over the summer to fill.

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PVB front-month at discount to ANEA front half-month €/MWh