With so much speculation surrounding the plummeting oil price, the state of the natural gas market has largely taken a backseat. However, gas prices are falling too, but the extent and impact of this varies around the world more than in the case of oil.

Natural gas is a fast-growing source of global energy – in their 2015 Outlook for Energy, ExxonMobil forecast gas demand growth to outstrip oil and coal significantly to 2040. In Asia, where the majority of demand growth is expected, we have seen tumbling prices in recent months. Spot prices in South East Asia have fallen by as much as 50% over the last seven months to around $9/mmbtu at the time of writing, but here is where the story diverges from crude. Existing long-term supply agreements linking gas prices to oil stifle the reaction felt by exporters, while at the same time lead to strenuous renegotiations. The impact of supply agreements – particularly in Asia – exacerbated the decoupling of regional gas prices in 2008/9 where European hubs leant on their greater liquidity and as a result prices rose at a slower rate to 2014.

Even with long-term agreements in place, it will be exporters of natural gas, particularly LNG, that are most concerned. In Japan, the highest priced consumer, LNG prices are widely expected to fall to below $13/mmbtu in 2015. In this environment the arbitrage opportunity for Middle Eastern, American or African producers evaporates. LNG spot trade is perhaps most-exposed and significant volumes are now traded as spot cargoes – amounting to some 30% of the total. Furthermore, Chinese importers have stated their preference for regional production and pipelined imports where the infrastructure is in place – and the infrastructure continues to grow. It's the LNG exporters that face the most pressure in strenuous times.

Natural gas and LNG have a bright future as economies move towards cleaner energy sources. But the next 18 months will be a serious test of the LNG value chain if Asian prices return to European levels once again.

Matt Loffman,

Douglas-Westwood Houston

BP's business activities in the US helped generate close to $143 billion in economic impact in 2013 and currently support nearly 220,000 American jobs, according to the company's US Economic Impact Report 2014.

BP's new report provides a detailed, state-by-state look at the breadth and impact of the company's activities in America. Since 2009, BP has invested nearly $50 billion, making it America's largest energy investor. In 2013 alone, BP spent $22 billion with vendors across the country on products and services, ranging from offshore drilling rigs to gasoline-producing equipment for its refineries.

"No energy company has invested more in the US over the past five years than BP," said John Mingé, BP America chairman and president. "Our investments not only provide the energy to power the nation, but they also support hundreds of thousands of jobs that fuel the economy."

BP's business investments in the US include oil and natural gas exploration and production, fuel and chemical refining, lubricants, shipping, trading, renewable energy production and cutting-edge technology research and development. The US also is home to a number of operations that serve BP's global businesses, such as the Center for High-Performance Computing in Houston, which houses the world's largest supercomputer for commercial research.

BP produces more than 628,000 barrels of oil equivalent a day – enough to light nearly the entire country. The company's three northern-tier refineries in Indiana, Ohio, and Washington are together capable of processing more than 742,000 barrels of oil per day. Also, BP's chemical and lubricant facilities supply materials necessary for modern life, including greases and engine oils marketed under the Castrol brand and chemicals used in fabrics and packaging.

In addition to physical assets and energy production, the US is home to nearly 40 percent of BP's publicly traded shares and more BP employees than any other nation. The US also is a center for BP research and recruitment. The company will spend $60 million this year on academic research, educational initiatives, and recruitment activities at more than 50 US universities.

At the corporate level, BP contributes more than $30 million a year to charitable and nonprofit organizations such as United Way of America and the National Multiple Sclerosis Society. This includes contributions through BP's unique Fabric of America program in which BP employees may annually designate $300 of corporate funds to a nonprofit organization of their choice within the United States. Since the fund's 2007 inception, BP has given more than $26 million on behalf of our employees, helping to support roughly 19,000 organizations in all 50 states.

The investments and spending detailed in the report do not include costs associated with cleanup and restoration activities in the Gulf of Mexico, or claims payments related to the Deepwater Horizon accident.

To view or download BP's full US Economic Impact Report 2014, please visit: www.bp.com/EIR.

BP in the US - By the Numbers:

Employees: More than 18,000 employees

Total Jobs Supported: Nearly 220,000 jobs

Employee Payroll and Benefits: $5 billion, including pensions and other post-employment costs

National Economic Impact Nearly: $143 billion in 2013

BP U.S. Investment since 2009: Nearly $50 billion – the most of any energy company

Money Spent with Vendors: More than $22 billion in 2013

Community Investment: $30 million in corporate contributions annually

NYC-based PIRA Energy Group believes that it is too early to get long oil. In the U.S., the stock surplus jumps. Specifically, PIRA's analysis of the oil market fundamentals has revealed the following:

It Is Too Early to Get Long Oil
The bulk of the first-half 2015 inventory builds will be in crude oil. As crude inventories build, more expensive storage will be required, which will relatively weaken prompt prices; that is, widen the contango. This can only be mitigated by an increase in inventory demand from currently depressed levels. PIRA believes that such an increase in demand is unlikely to be strong enough to offset the weight of the impending increase in inventory supply. In such an environment, it is very difficult for prompt crude oil prices to rally.

U.S. Stock Surplus Jumps
The global imbalance between supply and demand compared to last year is vividly apparent in the U.S. stock data. From a 9 million barrel excess in 2013, beginning the fourth quarter, it has now expanded to 85 million barrels as of December 26. This is an increase of around 10 million barrels versus the week earlier. 2013 stocks decreased this past week while in 2014 they increased. Crude stocks are now 25 million barrels higher than in 2013, having begun the quarter 7 million barrels lower. From deficits last year beginning the fourth quarter, gasoline and distillate stocks are now higher.

Latin American Oil Market Report
Latin American refinery runs will increase in 2H15 driven by the startup of a new refinery in Brazil and the restart of revamped capacity in Colombia. Latin American product imports will level off, breaking the growth trend of the last few years. The U.S. will remain the primary supplier of products for import into the region.

Closed U.S. Refineries Contribute to Overall Downtime
Permanently closed refineries in the U.S. have had a significant affect in lowering crude run demand and subsequent gasoline and distillate productionLatest market developments..

India Quarterly Oil Demand Monitor
India's recent economic performance was somewhat disappointing, as GDP expanded by an estimated 5.3% during 2014. Growth prospects have improved, however, as lower oil prices will allow households and businesses to increase spending and the central bank to loosen monetary policy. Vehicle ownership continued to rise, in spite of stagnant sales. End-user oil prices dropped sharply in recent months, including those for diesel. PIRA projects a moderate oil demand increase of 130 MB/D (3.3%) for 2015. But upside potential is significant, given how declining prices boosted India's oil demand in the past.

The information above is part of PIRA Energy Group's weekly Energy Market Recap - which alerts readers to PIRA's current analysis of energy markets around the world as well as the key economic and political factors driving those markets.