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Market comment: Asian buyers see rising prices on tight supply

04 May 2012 09:45:49 | lmd

Offers into northeast Asia for June and July delivery surged because of the cancellation of three cargoes from the Nigerian LNG (NLNG) facility on Thursday this week, according to sources.

This tightened supply in the already constrained market significantly, they added.

Traders said that with FOB prices now close to $14.00/MMBtu for Nigerian or Spanish volumes, offers into northeast Asia have mostly surpassed $18.00/MMBtu for July.

A few portfolio players are still offering at below this level, said several sources.

Bids from northeast Asian buyers are edging up gradually, with July now in the mid-to-high $17.00s/MMBtu, but such prices still failed to attract the interest of most sellers.

"There are very few offers for July available at present," a buyer in the region said.

"The market is getting tighter and tighter," the buyer added.

A deal was heard concluded in northeast Asia at $18.20-18.30/MMBtu, with volumes originating from an Atlantic-based portfolio seller from Nigeria, but this could not be immediately confirmed.

Meanwhile, the 138,000m³ Gemmata is moored at the Bonny LNG facility in Nigeria.

Sources said it is in the process of loading volumes for a Japanese trading house which will be sold into Japan, but this could not be immediately confirmed.

The tender for three Nigerian cargoes - which had been due to load on a free on board (FOB) basis between May 23-29 - was cancelled because of unexpected changes in the planning of the Train 3 maintenance facility, according to interested parties.

However, there remained no confirmation from the NLNG consortium.

While several market sources believed that the facility had suffered production issues, others said a lack of available shipping or unsatisfactory offers could have caused the seller to cancel the tender.

A buyer said the tender was cancelled as the consortium marketing the volumes and a buyer in northeast Asia had concluded a deal for all three cargoes before the bidding had officially closed.

However, this was not widely reported by other sources.

Shipping information showed that the 148,000m³ LNG Ondo is en route to South Korea's Tongyeong terminal from Nigeria's Bonny facility. The vessel is due to arrive on 13 May.

BP and GDF SUEZ swap volumes

In Italy, the GDF SUEZ-controlled 138,059m³ Bw Suez Boston is scheduled to arrive at Rovigo LNG terminal on 6 April from Egypt's Idku LNG, shipping data shows.

A spokesman for terminal operator Adriatic LNG said the cargo was for an existing capacity holder, which rearranged the delivery date to accommodate the vessel.

The delivery has increased market speculations that the cargo is part of a cargo swap between capacity holder UK-headquartered BP and Paris-based GDF SUEZ.

GDF SUEZ is a shareholder in Yemen LNG, which was forced to cancel five cargoes in April after the 6.7 million tonnes per annum (mpta) plant suffered a sabotage attack.

Montoir LNG conducts first reload

The GDF SUEZ-chartered 149,700m³ Grace Cosmos lifted a reload cargo at France's Montoir facility, a source close to the operations told ICIS.

The operation represents the first reload at Montoir LNG since its operator Elengy started to offer the service in February.

"It went very well, in just two days," the source said. The first reload at Montoir will open the door to more in the future, other sources said. "People have been waiting for GDF SUEZ, [a Montoir capacity holder and French gas incumbent] to conduct one reload to consider this option," a source said.

The Grace Cosmos is headed to Japan's Chita LNG terminal, where Chubu Electric Power (Chubu) has capacity.

In Britain, LNG stocks also fell substantially in spite of strong deliveries during April. LNG storage stocks were standing at just 37.15% on 29 April, having been as high as 55% on 19 April.

High LNG send-out into Britain's National Grid during April helped to balance a tight system caused by cold weather coupled with issues with pipe flows from the North Sea. The ongoing supply tightness has sent both prompt and near curve contracts higher at the British hub.

The rise in Britain's NBP near curve contracts is unlikely to spark spot demand from European buyers, traders said. NBP June '12 rose by more than $0.50/MMBtu from 16 April to $9.543/MMBtu on 1 May, according to ICIS.

"The NBP has gained a lot in the past two weeks but it's not enough to make European buyers competitive yet. With current Asian and South American prices, we are still far away from this," one source said. "Neither the latest gains, nor the small contango on the [NBP] near curve prices is likely to trigger demand for spot volumes."

The premium of the EAX over the NBP rose to $8.423/MMBtu on Friday as the recent bullish trend at the NBP reversed.

Kuwait may announce tender soon

Kuwait Petroleum Corp (KPC) is likely to announce a tender for one cargo for delivery in July, market sources said.

Kuwait's incumbent LNG buyer is likely to require volumes during the peak summer season to cope with rising domestic power demand. "While the market is very constrained right now, I think that the prices at $15.00-16.00/MMBtu could still make sense for Kuwait," a trader said.

"The netback to the Middle East and shipping flexibility that this destination provides is likely to entice some offers," the trader said.

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