Higher LNG to Britain likely in May and June on NBP premium

Additional reporting by Christopher Rene

LONDON (ICIS)–Britain would import more LNG relative to its northwest European neighbours in the coming months based on high NBP prices, despite relatively low storage capacity in Britain.

The NBP May ’21 contract expired at a premium to both the Dutch TTF and French PEG on 30 April, according to ICIS assessments.

ICIS assessed the NBP May ’21 at €23.519/MWh on 30 April, €0.288/MWh above its TTF equivalent and €0.469/MWh above the PEG front month.

This made Britain the most attractive destination of the three for LNG cargoes.

And monthly assessments from 4 May indicated this pattern would continue for the rest of the quarter, before the NBP moves back to a discount to its mainland European counterparts in the third quarter.

However, Britain has limited storage capacity and shippers rely on exporting gas to mainland Europe to store in facilities in countries including Belgium, the Netherlands and Germany. Therefore, an influx of LNG may pressure NBP prices so incentivising exports or cargo diversions.

British LNG imports in May will be somewhat limited by a 26-day shutdown at the Dragon terminal beginning on 17 May, but as Dragon received only one cargo in April the impact of this is unlikely to be significant.

On the other side of the equation, mainland hubs such as the TTF may see upside in order to attract more LNG, although much depends on Asian demand developments in coming weeks.

GLOBAL LNG PICTURE

Receding Asian demand from winter-led highs in the first quarter meant Europe accounted for its largest share of global LNG imports for 11 months in April despite overall volumes in each region drifting lower following the end of the winter period.

LNG imports into key European markets accounted for 24%, or 7.5m metric tonnes, of the global total, up 1 percentage point month on month but 3 percentage points lower year on year. Depleted natural gas stocks and persistently cold weather have built risk premium into regional gas curves and increased the incentive to ship LNG into Europe.

For the second month in a row the leading LNG importer into northwest Europe in April was France. A total of 1.8m metric tonnes was supplied followed by the UK with 1m. The Netherlands was third with 0.8m, followed by Belgium with 0.4m. All four countries recorded monthly falls.

Month-to-date LNG imports into the top five buyers – China, Japan, South Korea, India and Taiwan – accounted for 59%, or 18m metric tonnes, of the global total, down 1 percentage point month on month and year on year.

Uncertainty has crept into the near-term demand outlook for Asia amid rising coronavirus cases. India has been particularly vulnerable to pandemic developments with a surge in cases leading to a raft of lockdown measures, and declining industrial activity while the shipping market has also been disrupted. City-wide lockdowns were also imposed across Japan in late April .

Despite this, spot Asian LNG prices do remain at elevated levels given the transition towards the lower-demand summer months. EAX calendar month+2 averaged $7.973/MMBtu in April, up $1.755/MMBtu month on month and $5.718/MMBtu year on year. The market has been propped up by the uptrend in European gas markets, recent strength in oil and bullish tender results.