GLOBAL LNG-Asian spot prices hit new lows as oversupply weighs
Asian spot prices for liquefied natural gas (LNG) dropped to new lows this week as sporadic spot demand failed to change the overall trend of oversupply in the market.
Spot prices for April delivery to northeast Asia LNG-AS are estimated at around $6.20 per million British thermal units (mmBtu), down 10 cents from the previous week.
BP sold a cargo to Gunvor at this price on Thursday for mid-April delivery to Asia in the Platts open window. Japanese utility Tohoku Electric bought a cargo in the market for April delivery at a similar price, a trade source said.
There were several enquiries for deliveries to China between late April and early May after traders returned from the Lunar New Year holidays, but overall LNG demand across north Asia remained exceptionally weak, sources in Singapore said.
The current price is at the lowest level since September 2017, but it is unlikely to have reached its bottom yet.
“I think (when the price falls to) between $5-6/mmBtu, we should start to see some demand creation in Asia,” a trader in Europe said, adding that it would start rebalancing the flow of cargoes between the Atlantic and Pacific basins.
There were some offers in Europe from sellers looking to divert their cargoes from Asia to Europe, another trader said.
South Korea’s KOGAS is also diverting cargoes from its U.S. offtake to Europe this winter, with the latest cargo to reach Britain’s Isle of Grain terminal on Feb. 28.
Gas prices in Europe fell this week too, contributing to the weakness in the global LNG market. A stronger oil market may support gas prices somewhat but weak demand and ample supply are expected to keep them generally low.
Cargoes in Europe traded this week at around 95 percent to Britain’s gas price benchmark for delivery into Britain, around 96-97 percent to the Dutch gas benchmark for delivery to the Netherlands, a 30 cent discount to the Dutch price for delivery to Spain and a 20 cent discount to the Dutch price for delivery to Italy, a trader said.
A number of outages that have taken place so far this year contributed to at least 15 missed cargoes, but oversupply is much higher than that.
Train 2 at Nigeria’s Bonny plant was off this week, after going offline last week, sources in Europe said. Train 1 which was also offline last week is back online, they added.
In the United States, production recovered after an outage last week at one of the trains at Sabine Pass, a U.S. trade source said.
“The train didn’t fall to zero, as evidenced by still a lot of gas trading out there,” the source said, adding that current production levels were around 5.2 billion cubic feet per day.
U.S. producer Cheniere, which operates Sabine Pass, declined to comment.
Cheniere, however, could make a transhipment of a Yamal LNG cargo in Europe, which would signify that the company may need to substitute volumes lost in maintenance and loading halts in the United States earlier this month.
The Cool Explorer which is empty and is heading to the Gate terminal in the Netherlands is chartered by Cheniere, shipping sources said.
New supply options this week came from Russia’s Sakhalin 2 plant and Angola LNG. India’s Gail offered a new swap of its U.S. offtake.
On the demand side, Argentina’s Integracion Energetica Argentina (IEASA), Kuwait Petroleum Corp (KPC) and Mexico’s CFE issued buy tenders.
Source: Reuters (Reporting by Ekaterina Kravtsova, additional reporting by Sabina Zawadzki in LONDON, Henning Gloystein in SINGAPORE, Collin Eaton and Gary McWilliams in HOUSTON, editing by David Evans)