US Natural Gas gets a lifeline from Japan

Jun 26 • Market Commentaries • 3450 Views • Comments Off on US Natural Gas gets a lifeline from Japan

During early Asian session, oil futures prices are trading in a lower trend on concern of rising stock piles, where lower demand is expected from major oil consuming nations. Prevailing European debt crisis getting tough day by day as partial solutions are not helping the global market to withstand. The credit rating agency Moody has cut down ratings of 25 Spanish banks on yesterday. Ahead of European summit starting from Thursday, speculation of failure is spreading over the Globe.

German Chancellor Angel Markel has hardened her resistance to sharing euro- area debt to resolve financial crisis. Market is waiting for today’s bond selling by Italy and Spain. Above concerns are keeping Euro under pressure, hence oil futures are expected to continue the bearish trend during European session also. From, US economic data consumer confidence is likely to fall further, whereas recovery in manufacturing sector is expected.

Overall, economic data may have slight mixed impact on oil price trend in the US session. From fundamental front, US gasoline and Distillates stocks are likely to increase, which may further weigh on oil prices.

The buzz in Natural Gas is all about a report on Dow Jones Newswires that Japan hopes it can secure liquefied-natural-gas supplies from U.S. shale-gas deposits, although the two countries don’t yet have a free-trade agreement.

“We are conducting negotiations at the moment so that it can be exported unconditionally, even if we don’t have an FTA,” Yukio Edano, Japan’s minister for economy, trade and industry, said in an interview at St. Petersburg in Russia, according to the report.

In the absence of domestic production of such fuels, Japan pays high prices for LNG imports. Gas prices in the U.S. are relatively much lower.

Although new production techniques have boosted U.S. shale-gas output and turned the country into the world’s biggest gas producer, opposition to large-scale gas exports is rising, Dow Jones reported.

The report added that while the Department of Energy could be expected to approve requests for LNG exports to countries with which the U.S. has free-trade agreements, the agency has been delaying decisions on exports to other countries until it completes its studies on the potential domestic impact from exports.

Edano said he believed that the U.S. could meet Japan’s LNG needs without hurting domestic consumers. “There is plenty of room for [the U.S.] to export shale gas,” he reportedly added.

Ever since the tsunami that destroyed or caused the closure of all the Islands nuclear electric production the country has been facing difficult securing the energy it needs to produce electricity. This new agreement would help boost the US exports and help reduce the Japanese trade balance which has been distorted because of its imports of crude oil.


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Currently, gas futures prices are trading above $2.664/mmbtu with fall of near 1 percent. Today we may expect gas prices to continue the positive trend supported by its intrinsic fundamentals. As per National Hurricane Centre, US tropical storm Debby formed on yesterday in Gulf area is slowly dissipating. Currently 40 knots, which may create supply concern to add positive direction in on gas prices. As per US weather forecast, temperature is expected to remain high in eastern region, which may create demand for gas consumption. On the other side, fall in rig counts is making lower production output. The gas-directed rig count slid this week by 21 to 541, its eighth drop in nine weeks and the lowest since August 1999 when there were 531 gas rigs operating, data from Houston-based oil services firm Baker Hughes showed. Lower production with higher demand of Canadian gas may add points for natural gas prices.

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