The UK's Brexit vote is expected to have a bearish effect on the global LNG market due to the weakening of European currencies, several trading sources said Friday.
News of the UK's decision to leave the EU on Friday caused both the pound and the euro to weaken against the dollar, the currency in which LNG is traded.
This in turn has reduced the value that regasified spot LNG at western European gas hubs, which have traditionally been considered as a pricing floor for the global LNG market.
The UK's National Balancing Point is often used as a reference for the relative value of spot LNG transactions, with prices at the Dutch Title Transfer Facility also used as relative marker.
At close of business Friday, the Platts assessed NBP forward contract for July had lost 4.9% of its value in dollar-denominated terms day on day, moving from $4.934/MMBtu on June 24 to $4.694/MMBtu June 25.
In pound terms, however, the value of the July contract gained 3.9% or 1.3 pence to close at 34.55 pence/therm.
In the case of TTF, in dollar terms the Platts assessed July forward contract lost 5.26% of its value between Thursday and Friday, moving from $5.056/MMBtu to $4.790/MMBtu.
The change in terms of euros, which the TTF is traded in, was a more modest loss of 3.29%.
Multiple trading sources said that the weaker dollar-denominated European hub prices would have a bearish spillover into the LNG market.
"So far, the only effect [of the Brexit] is in terms of currency," said a European trader. "The cheaper NBP means cheaper LNG."
A London-based trader added: "The NBP has been raising the floor for LNG consistently in the past few weeks. So now we should see that floor moving lower as the NBP comes off."
The Platts assessed markers for LNG delivered to Northwest Europe and Southwest Europe for July both lost 23.1 cents Friday, to close at $4.506/MMBtu and $4.646/MMBtu respectively.
Meanwhile, the Platts East Atlantic Marker for July, which considers the value of a cargo offered on an FOB basis from ports across the East Atlantic, fell 20 cents to close at $4.60/MMBtu.
