LNG prompt supply tightens as traders try to fill positions

The number of LNG cargoes available for prompt delivery is currently tight despite market talk of excess supply, three market sources in East Asia said.

Traders are trying to fill outstanding positions or optimising for January and February deliveries, market sources said.

While warmer-than-average temperatures and higher-than-expected inventories are making winter season demand this year lower than in previous years, there is still some demand from south Asia and the Middle East.

“There are some traders in Asia with short positions; they are having difficulty finding cargoes at the moment,” one source said.

A trader based in Singapore confirmed receiving queries for one to two cargoes for specific delivery dates in January and February. The destination was not disclosed.

“Some market participants have chosen to wait it out and observe the portfolio companies. Their activity may dictate the pricing direction into January,” the trader added.

Indian buyers such as GAIL, Gujarat State Petroleum (GSPC) and Indian Oil Corp Ltd (IOCL), Pakistan State Oil (PSO), and Jordan’s NEPCO are currently in the market for spot cargoes for early 2016. NEPCO recently launched a tender on 14 December for up to two cargoes for first quarter 2016 delivery.

Despite additional supply due out from the US and Australia soon and low Brent crude levels pressuring LNG price expectations through to March, market sources say they expect the bearish sentiment to be cancelled out by portfolio companies and traders who are willing to pay more to cover short positions, leading to an overall bullish trend for January 2016 prices.

They cautioned, however, that February prices may reverse on increasing supply.

In a recent tender by Indonesia’s Donggi-Senoro LNG project, Switzerland-based trading company Vitol was heard to have won the single-cargo tender in the high $7.00s/MMBtu DES (delivered ex-ship) for delivery in the second half of January, a level that is seen as above market levels and may be for covering a short position, according to two traders in Japan earlier in the week of 14 December. darren.david@icis.com