EAX slides further as Asian LNG demand cools
East Asian LNG prices fell gradually during the past four weeks amid lacklustre demand, robust regional supply and weak oil prices. Northwest Europe saw a resultant increase in LNG deliveries, although the focus of spot market activity remained firmly in the Americas.
The EAX June '13 assessment closed at $14.269/MMBtu on Wednesday, having fallen by $0.619/MMBtu since it became the front-month on 16 April. The July'13 contract fell by $1.125/MMBtu, to $14.450/MMBtu over the same time.
The front-month spread between Asian and Northwest European spot LNG prices remained within $5.00/MMBtu, allowing European buyers a window to secure cargoes.
As the new front-month rolled on 16 April, the availability of Pacific Basin cargoes put downward pressure on prices. The Brunei LNG plant emerged as a new source of flexible LNG following the reduction in its contractual obligations to Asian buyers in April - offering two cargoes for late May/early June delivery. Robust performance at the Pluto LNG project allowed operator Woodside to offer one cargo for June delivery.
The supply situation improved when Shell lifted force majeure on feedgas to the Nigeria plant on 17 April, allowing NLNG to lift its own force majeure with customers.
Weakening crude oil prices also depressed sentiment as ICIS Brent drifted below the $100/bbl threshold to close at $98.08/bbl on 18 April.
On the demand side, Japan's electricity utilities were understood to have brought forward contractual LNG purchases to suppress demand before a possible restart of selected nuclear facilities in August. It emerged that Taiwan's monopoly buyer CPC had purchased volumes for May delivery at $14.50-15.00/MMBtu in the first half of April. However purchases appeared to be limited in the second half of the month.
By 25 April, the EAX June assessment had fallen to $14.475/MMBtu from $14.888/MMBtu a week earlier.
By 1 May, Japanese buyers were said to have finalised procurement for June, although sources estimated Japanese demand for July-September at five cargoes per month.
Most sellers had shifted their attention to the Americas, in particular Mexican electricity utility CFE's 30-cargo tender for 2013-14 delivery and Argentinian state oil company YPF's seven-cargo tender for the rest of 2013. Both promised to offer higher prices than those in Asia, and sellers were initially reluctant to drop July offers into east Asia below $15.000/MMBtu.
By 9 May, a July offer into east Asia was recorded at $14.90/MMBtu, but this remained substantially above the highest bid at $14.10/MMBtu. The buyers' position was strengthened on 10 May, when robust production obliged Australia's North West Shelf plant to tender two cargoes for late June and July delivery.
By 15 May, July was assessed at $14.450/MMBtu, down $0.538/MMBtu since 1 May.
Despite Atlantic Basin availability during the period, northwest Europe saw an uptick in deliveries on the back of weaker Asian LNG prices. The premium of the EAX over the ICIS Northwest European Index fell to $4.507/MMBtu for June delivery and $4.700/MMBtu for July delivery by 15 May.
On 20 April, Eneco received the first cargo of the year at the Netherland's Gate terminal on a Q-Flex tanker, which was understood to have been delivered by Shell under a flexible four-year deal with the Dutch utility.
The Total-operated Arctic Lady also delivered partial cargoes from the restarted Snohvit facility to Zeebrugge on 10 May and the Isle of Grain on 11 May.
The UK's South Hook terminal also took delivery of eight Q-Flex or Q-Max tankers from 16 April to 15 May under its long-term deal with Qatargas. By contrast, the terminal took delivery of only five vessels in the first quarter of the year. Simon Ellis
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