LNG Markets Analysis

Global regions compete for spot LNG

20 April  2016 | Ludovic Aldersley, ICIS LNG Analyst


Sellers of spot LNG shifted attention away from large East Asian buyers over the last month, as a number of tenders were launched in the Americas, the Middle East and India

The ICIS May South America index (SAX) stood at a premium to the East Asia Index (EAX) between mid-March and mid-April, as demand in the Americas was strong in the second half of March. Later, demand in the Pacific basin rose, boosting east Asian prices.

GLobal LNG VS NW Europe LNG Assessment May'16

By the time the May deliveries were assessed for the final time on 15 April, the SAX was $4.26/MMBtu, close to the same level where it opened as front month on 16 March.

A series of tenders have been launched during this period. First, Argentine LNG buyers announced another spot tender, the third this year, only a day after the second closed.

During the following week, bullish sentiment became more widespread as tenders from buyers in Mexico, South Korea, Thailand and Taiwan were launched. These were followed by tenders for delivery to Egypt, India and Chile.

Not all these tenders were for delivery in May, as some were for later deliveries. But still prompt prices were affected because of the expected buying appetite of the sellers. This resulted in deliveries for early May trading at a premium to deliveries for late May, as well as for June.

Outside of tender activity, traders focused on sourcing LNG. Backwardated northwest European hub pricing provided an opportunity to secure reload supply for delivery to Argentina in the southern hemisphere winter months.

The premium of the front month SAX over bearish European hub prices was as high as $0.88/MMBtu in early April. This was over double compared with the second half of March, when the premium hit $0.39/MMBtu.

Elsewhere, buyers in the Middle East also showed some capacity to absorb slack demand from the northern hemisphere, as air conditioning has boosted LNG trade in Kuwait, Dubai, Jordan, and Egypt. But in Japan certain buyers are looking at incorporating more nuclear into their energy mix, which would weaken LNG demand.

In addition to tenders from end buyers in Egypt and India, demand has also been buoyed by a number of contracted sellers with short positions.

In India, the Dabhol terminal is due to close during the monsoon season, typically from mid-May to mid-September. Soon it will receive the second cargo produced from US liquefaction plant Sabine Pass. The cargo left the US on 15 March.

Plant operator Cheniere expects Sabine Pass production to ramp up to operating capacity by May.

In Australia, shortly after the Chevron-operated Gorgon LNG plant shipped its first cargo on 21 March, technical issues forced an unplanned shutdown, which is expected to last 30 to 60 days.

A number of relatively recent LNG plants in Papua New Guinea and eastern Australia have continued to sell excess or uncommitted volumes on a spot basis.

Gorgon’s outage has had little impact on market sentiment or direction, at least for the moment. 

By Ludovic Aldersley

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About the Analyst

Ludovic Aldersley,
LNG Analyst, Global
Ludovic Aldersley has been the deputy editor of the global LNG team at ICIS Energy for the last two years, having worked his way up through the market reporting ranks over the previous two years.

He has reported on all aspects of the LNG value chain, from long-term sales and purchase agreement (SPA) transactions to the single-cargo delivered ex-ship (DES) and free on board (FOB) spot market, across a broad spectrum of geographies west and east of the Suez Canal. Within the value chain, his specialisation has been on LNG shipping and the charter market.

He has led the development of a charter database at ICIS Energy and has been closely involved in expanding the range of LNG services ICIS provides: from a one-stop shop window of analytics, to proprietary ship-tracking services, as well as a suite of small-scale LNG products for emerging markets.

He graduated with a Bachelor of Science Economics degree from the Universities of Bristol and Toulouse in 2007.

About ICIS

ICIS is the world's largest petrochemical market information provider and has fast-growing energy and fertilizer divisions. Our aim is to give companies in global commodities markets a competitive advantage by delivering trusted pricing data, high-value news, analysis and independent consulting, enabling our customers to make better-informed trading and planning decisions. We have more than 30 years' experience in providing pricing information, news, analysis and consulting to buyers, sellers and analysts.

With a global staff of more than 800, ICIS has employees based in Houston, Washington, New York, London, Montpellier, Dusseldorf, Karlsruhe, Milan, Mumbai, Singapore, Guangzhou, Beijing, Shanghai, Yantai, Tokyo and Perth. Some 350 of ICIS’s staff are journalists engaged in reporting market prices and news, and ICIS is fully committed to upholding the highest journalistic principles of verification, corroboration and authentication. ICIS has a compliance framework that along with its methodologies and business processes adheres to the requirements of the IOSCO PRA Principles.  

ICIS is a division of Reed Business Information, part of Reed Elsevier Plc.


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