Asia sees some rebound in spot LNG demand

A major state-owned LNG buyer in China is seeking a single cargo for March delivery, according to market sources.

The buyer was bidding in the low $4.00s/MMBtu, but there were no offers below $5.00/MMBtu for March delivery on 1 February, sources said.

“The market is weak, but sellers are still reluctant to cross the $5.00/MMBtu mark during the peak of the winter season,” a buyer said.

On an FOB (free on board) basis, a producer in the Pacific basin sold a cargo at $4.50-4.60/MMBtu on 1 February for lifting this month, but the cargo’s next destination was not disclosed.

The FOB deal supports a DES market of around $5.00/MMBtu on the basis of shipping economics, traders said, adding that either the Australia Pacific LNG (APLNG) and Gladstone LNG (GLNG) projects were 
the seller.

While the extent of the outage at Russia’s Sakhalin-2 LNG project remains unclear, a seller in Singapore said he has received enquiries from some affected buyers.

A technical issue occurred in the week ended 29 January, but sources said the project had some LNG in its storage tanks to complete scheduled loadings.

“The market for March is rebounding on this basis. I think the next transaction will take place in low $5.00s/MMBtu,” the seller said. Another trader confirmed that some interest in March volumes has materialised as a result of the potential outage.

In Japan, Kansai Electric is marketing cargoes for delivery in March.

The utility had bought more LNG than it required for the winter previously and is now seeking an alternative market for its cargoes, 
sources said.

Three other utilities in Japan and South Korea are in a similar position, market sources said, with South Korean incumbent buyer KOGAS supposedly attempting to arrange time and physical swaps.

In the derivatives market, liquidity for the FOB Singapore SGX LNG Index Group (SLInG) products on the Singapore Exchange (SGX) could grow gradually.

The first SLInG trade between Singapore-based energy company Pavilion Energy and Switzerland-based energy trader Trafigura on 25 January, however, was more political than commercial in nature.

“There is clearly a drive to promote the products. The government of Singapore is very keen on seeing the [derivatives] market take off,” a Singapore-based source said.

As of 1 February, the SLInG was posted at $4.70/MMBtu for March delivery and $4.65/MMBtu for April.

The prices represent a premium to a netback to Japan on a round-trip shipping economics of $0.40-0.45/MMBtu.

The FOB Singapore prices are also supporting the market’s sentiment of a rebound in DES prices for northeast Asia this 
week. roman.kazmin@icis.com