GLM MARKET REPORT: Asian spot LNG markets edge up

Big cuts to US LNG production that will continue for August loadings have helped to bring some balance to the global market, but early Q4 trade is still priced at record lows heading through the shoulder months.

The market for September delivery rose in Asia this week, but at $2.70/MMBtu outright, spot prices remain a concern for sellers. Ongoing supply uncertainty over the future of Gorgon LNG production in Australia lent some support, amid an extended outage on Train 2.

Demand remains strong in China and India, with July imports rising year on year, but there are few bright demand spots elsewhere in Asia.

Asian spot prices rose relative to the Dutch TTF. Two reloads are lined up from France and there could be scope for more if European gas demand falls in August.

LIMITED PRICE INCREASES

The ICIS East Asia Index for September delivery rose to $2.70/MMBtu by Thursday, up from $2.40/MMBtu the week before. October was assessed at a $0.35/MMBtu premium.

US LNG loadings will increase in September with fewer cancellations expected. This could mean an increase in floating cargoes prolonged for delivery later in the year.

LNG shipping activity increased with a number of new charters in both basins. Charter rates have stabilised and firmed a little with demand to cover free on board (FOB) tenders but adequate tonnage remains.

PLENTY OF SPOT SUPPLY

A range of spot cargoes are being marketed in the Pacific on a prompt basis by sellers. These include Australia’s Santos and Woodside, and Malaysia’s Petronas, which are each offering cargoes in August and September.

Russia’s Sakhalin Energy awarded a sell tender for around $2.65/MMBtu for a 30 August loading. The cargo was offered on both an FOB and delivered basis.

Indonesia’s Pertamina awarded at least one of a three-cargo FOB sell tender from Bontang for August, September and October loadings, with a variety of small premiums reported to northeast Asian marker prices.

Papua New Guinea’s PNG LNG awarded a cargo for late August/September delivery between $2.35-2.40/MMBtu on a delivered basis.

POCKETS OF DEMAND

Japan’s Hokkaido Electric bought a September cargo for around $2.70/MMBtu, marking a high price for the week. There was interest as to whether this could mean a switch towards more gas-fired power generation in Japan. But overall, Japanese LNG demand still remains below 2019 levels.

China’s LNG demand continues to rise year on year amid falling longterm LNG contractual prices and cheap spot LNG prices relative to domestic LNG and pipeline imports.

India’s LNG imports could rise by 14% in July year on year with rising supply into the Mundra and Ennore terminals.

Indian buyer Bharat Petroleum closed a single cargo tender for September delivery.

SOCAR Trading offered in the lowest price to supply an August cargo to Pakistan LNG in a buy tender.

EUROPE’S Q4 ALLURE

Concerns extended over the fresh spread of the coronavirus in Europe and the potential impact new lockdowns would have on gas and power demand.

TTF near-curve prices held steady, with Q1 ’21 priced at more than double from September ’20. In the absence of rising demand into the fourth quarter, peak first-quarter prices could come under downward pressure.

Two reloads are likely to come from France at the end of July and early August. Asian and Middle East September markets hold almost a $1.00/MMBtu premium to the August TTF. But buying TTF September and selling to the east in October could offer a better margin.

European reloads could offer an alternative to cancelled US LNG cargoes for suppliers seeking prompt Atlantic volume.

SNIPPETS OF AMERICAS DEMAND

Mexican CFE’s tender for two spot cargoes into Manzanillo for August delivery closed on 28 July.

Mexico has not been a significant LNG buyer in 2020. CFE has purchased 13 spot cargoes this year, according to LNG Edge.

US pipe gas flows to Mexico will increase when the Wahalajara pipeline system ramps up in the coming months.

Chile’s GNL tendered to buy five cargoes in 2021 but is not in the market for 2020. Most supply into Chile is long term.

Brazil’s LNG demand has fallen sharply in 2020 amid lower gas demand, and despite falling Bolivian pipeline imports.