LNG Markets Analysis

Spot European gas prices match Asia LNG on cold snap

16 February  2017| Alex Froley, ICIS LNG Analyst

 

The ICIS March East Asia Index (EAX) for spot LNG cargoes was assessed for the final time at $7.125/MMBtu on 15 February, down $1.200/MMBtu since becoming the front month on 16 January. As a front month, the contract had peaked on its first day of assessment at $8.325/MMBtu on 16 January and was at its low on the final assessment day.

During its period as front month, the March EAX assessment averaged at a price of $7.716/MMBtu, which was down 19% from the rolling front-month average, but up 49% from the March EAX assessment average the year before. The ICIS EAX is the arithmetic average of the daily delivered ex ship (DES) assessments for China, Japan, South Korea and Taiwan.

EAX prices moved steadily downwards over the course of the month, continuing the trend seen since late December, when the March EAX had peaked at $9.200/MMBtu on the back of demand for replacement cargoes to cover an outage at train one of Australia’s Gorgon liquefaction project. Gorgon returned to production at the start of 2017, and supply received a further boost as west Africa’s Angola LNG resumed spot cargo tenders in January after a halt in the second half of December.

Improved output eased pressure in the market, while major buyers such as Japan, South Korea and China had sufficient inventories to avoid entering the market in any force during the latter part of winter. They were also able to meet extra requirements by turning up volumes from their long-term suppliers. Trading activity in the region also quietened at the end of January due to the Chinese New Year holidays.

The strong year-on-year gain of 49% reflects higher oil prices this year. Although spot-traded LNG is priced according to individual deals between buyers and sellers, spot supplies compete against volume available through long-term oil-indexed contracts, and oil therefore exerts an important influence on the market.

East Asian LNG VS European Gas

 

High prices in Europe

Unexpectedly high prices in Europe during the past month made the region an attractive alternative destination for spot cargoes. A cold snap sent spot gas and near-curve prices in southern France and Spain to the highest in the world. The Spanish PVB gas price for March, for example, hit $9.460/MMBtu in late January, around $1.500/MMBtu above the March EAX at the same time. Spain, southern France and Portugal all received spot-tendered cargoes from Angola.

In early February, meanwhile, prices in northern Europe almost reached EAX levels when the UK NBP March contract approached $7.500/MMBtu on concerns over a late-winter freeze that was then predicted for late February and March. Prices soon fell back, however, as the weather outlook changed.

ICIS will launch publication in March of gas price data for key European benchmarks in $/MMBtu, enabling easier comparison of the best trading location across global markets.

Major deals during the period included Italian producer Eni winning a 15-year contract to supply Pakistan LNG with 180 cargoes from July 2017 to July 2032 at a price of 12.29% of Brent crude and Swiss-based trading house Gunvor agreeing to supply the same company with 60 cargoes from July 2017 to July 2022 at 11.62% of Brent. Egypt’s EGAS agreed with Russia’s Rosneft, Oman’s OTI and France’s Engie for the delivery of up to 45 cargoes during April-December 2017. Argentina’s ENARSA procured 16 cargoes for its southern hemisphere winter demand, agreeing to take 11 from trader Trafigura, three from trader Glencore and two from US exporter Cheniere for April-September this year.

Cargo moves

Notable voyages recorded on ICIS analytics platform LNG Edge during mid-January to mid-February included the arrival of the first commercial delivery to France’s new Dunkirk LNG terminal aboard the 210,000cbm Murwab from Qatar on 22 January and the departure from Peru on 6 February of the first cargo from that country headed towards the UK, aboard the 134,000cbm Gallina.

The strong prices in the south of France were evidenced by highly unusual shipments from the north to the south of France. The 154,000cbm GDF Suez Point Fortin and the 75,000cbm Global Energy both picked up cargoes from the Montoir terminal in northwest France, sailed around Spain, then unloaded them at Fos Cavaou in southern France a few days later, as France’s onshore pipeline network struggled to pump gas southwards fast enough to keep up with demand.

Some 14 cargoes departed the southern US Sabine Pass export project over the January 16-February 15 period, for varied destinations including Japan, Mexico, India, Turkey, Portugal and Spain. US exports will soon build on their growing contribution to the market with the expected loading of the first commercial cargo from Sabine Pass Train 3 in March. First LNG from Train 3 at Australia’s Gorgon project is, meanwhile, expected to follow early in the second quarter of the year.

by alex.froley@icis.com



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About the Analyst


Alex Froley
LNG Analyst, Global, ICIS
alex.froley@icis.com
Alex Froley follows the global LNG markets as an analyst at energy markets information provider ICIS. As well as following the latest market trends in pricing and trade flows, he is working on the development of new features for the company’s analytics platform LNG Edge.

Alex has over fifteen years’ experience in the wholesale energy markets, with a particular focus on European gas and electricity trading and the rapidly-expanding market for spot LNG. He has worked as a price reporter assessing markets including the UK NBP and Dutch TTF gas markets, the German electricity market and Asian LNG and has been responsible for real-time news, daily and fortnightly publications about the natural gas industry. He has also worked as a European gas analyst tracking supply and demand data for gas flows across Europe.

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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