On Friday, natural gas prices increased while China’s new massive pipeline can reduce Russia’s dependence on European buyers.
Natural gas futures for April delivery increased by 1.07% to $2.18 per metric million British thermal units. The projection was for March 24’s Asian afternoon session.
Analysts say the project shows an ongoing imbalance between the longtime strategic allies. Beijing became Moscow’s economic lifeline, particularly regarding energy purchases like natural gas. This came after Western sanctions for the Russia-Ukraine invasion slashed vital trade links.
They added that China is not rushing to sign anything unless the proposal favors the Asian country’s terms.
Chinese President Xi Jinping’s summit and Russian leader Vladimir Putin discussed the project in Moscow this week. All agreements have been settled on the Power of Siberia 2 project, as said by the leader of Russia.
However, their joint statement only mentioned pushing research and consultation for the natural gas pipeline.
In addition, Power of Siberia 2 could manage shipments of 50.00 billion cubic meters of natural gas to China yearly. It matches the capacity of the controversial Nord Steam 2 from Russia to Germany.
Furthermore, a senior Russian official said last year that the new project could strategically replace Nord Stream 2.
Fuel Switching Supports Natural Gas Prices
On Thursday, analysts said that European natural gas prices rarely declined this year due to fuel switching, which increases demand. Another reason is the need to maintain the attraction of LNG supplies to the region.
Also, they added that they predict a price surge later in the year. As Asian natural gas requests are likely to return, the sector goes to a bullish momentum this winter. As a result, prices could go higher over the cold weather for months into next year.
On the other hand, they noted a possible downside in summer amid an intense storage situation. Furthermore, Europe already had very comfortable inventory levels. Therefore, filling storage by 90.00% in November would be fine.
