GLOBAL LNG-Supported by demand, prices exceed past winter peak
Asian spot liquefied natural gas (LNG) prices edged higher this week as Asian demand ahead of the winter persisted and the region’s vulnerability to unpredictable natural events was underscored by the worst power outages in years in Japan due to an earthquake.
Spot prices for October LNG-AS delivery in Asia rose to $11.55 per million British thermal units (mmBtu) this week, up 5 cents from the week before, market sources said.
At such levels, during a usually off-demand time, prices are not only at a four-year seasonal high, they are above winter peaks of 2014 onwards, according to Reuters data.
Few trades were seen this week but prices were well supported by crude oil, which jumped mid-week due to a hurricane approaching the U.S. Gulf Coast, against which some spot LNG trades are done.
Demand for the super-cool gas remained constant as Asian buyers prepare for winter, eager to avoid a repeat of last year when unexpectedly low temperatures caused prices spikes.
Japan, the world’s largest LNG buyer, suffered unprecedented heatwaves over the summer, depleting storage levels which now have to be rebuilt in time for winter. One trader said its September import volumes may be higher than a year ago.
While nuclear restarts should broadly reduce Japan’s demand for LNG, a 6.7 magnitude earthquake that struck the populous northern island of Hokkaido on Thursday triggered a blackout after disabling a coal energy plant and cutting power to an already shut nuclear facility.
China is also preparing to shore up supplies, with state-controlled CNOOC opening its LNG terminals to third parties and the government considering subsidies to encourage gas storage and tax rebates for LNG imports.
South Korea’s Korea Midland Power Co Ltd (KOMIPO) is seeking an LNG cargo for delivery between Nov. 16 and Nov. 21 in a tender closing on Sept. 10, a document reviewed by Reuters showed.
Japan’s Saibu Gas is seeking one cargo every quarter for delivery over 2019 to early 2022 and may award deals in October, industry sources said. A South Korean buyer is also looking for cargoes to be delivered over 5 to 10 years, two trade sources said.
Another trader said Angola had sold a September cargo to Vitol and an October cargo most likely to Shell, while another trader said the October cargo may have gone to the Middle East and India region for below $11 mmBtu.
One trader said an earlier issue at Russia’s Sakhalin-2 terminal, which halted production at one train at the start of the month, has likely been resolved.
Russia’s Yamal LNG plant has offered cargoes for winter delivery to Asia, traders said, although it was not clear how many have been sold.
Production at Yamal has been ramping up faster than expected with another three newbuild arctic-classed LNG carriers about to head towards the facility, taking the total of vessels working from Yamal to 10.
In the United States, feedgas flowing into Cheniere Energy’s Sabine Pass train 4 terminal fell this week, which may indicate an outage at the 4.5 million-tonne-a-year plant.
Separately, vessels coming in and out of the Sabine Pass Channel on the Texas-Louisiana border have been restricted by the U.S. Coast Guard due to a displaced pipeline, blocking the entry of one and the departure of another LNG tanker.
Source: Reuters (Reporting by Sabina Zawadzki, editing by Louise Heavens)