LNG Markets Analysis

Late summer demand drives spot LNG higher

20 July  2016 | Ludovic Aldersley, ICIS LNG Analyst


Spot prices across East Asia, the Middle East, India and South America all rose for the third month running as marginal LNG demand outweighed supply.

The ICIS August East Asia index, EAX, was assessed for the final time at $5.70/MMBtu on 15 July, having gained $0.40/MMBtu since becoming the front month on 16 July.

GLobal LNG VS NW Europe LNG Assessment May'16


Despite a brief period during the beginning of July when both the EAX and the South America index, SAX, lost $0.25/MMBtu, price assessments have rebounded to levels not seen since mid-January.

The surge towards mid-July coincided with tenders globally seeking in excess of 14 cargoes for delivery between late August and early October.

Sellers struggled to keep up. ArgentinaÆs state-run buyer ENARSA cited low seller turnout when it only partially awarded its 10-cargo tender. The buyer though showed the extent of its appetite by immediately launching another tender.

Having bought five shipments on 14 July ENARSA immediately sought another eight for September. The additional slots may not have necessarily reflected higher demand from the buyer, but showed a willingness to provide greater flexibility to sellers and encourage more offers.

Elsewhere in the region, buying consortium GNL Chile had secured a spot delivery to Quintero, while in a separate transaction Russian independent Novatek Gas & Power bought and sold its first spot delivery also to the Quintero terminal.

The southern-hemisphere winter has supported gas demand with temperatures in Chile below the five-year average and a lack of rain in early July driving four of the nine principal hydroelectric dams to their lowest levels in three years.

A relatively tight LNG supply picture means a number of re-exports from Europe are expected to arrive in South America, as well as East Asia and the Middle East over the coming month. The attractiveness of sourcing from Europe improved after the UKÆs referendum on EU membership weakened both pound sterling and the euro relative to the US dollar.

ICIS LNG Edge vessel tracking and analytics tool ICIS analytics platform, LNG Edge shows re-exports from France are headed to Japan and Taiwan in August. On 15 July, the EAX premium to the Northwest European index (NEX) closed at $1.34/MMBtu.

Argentina and Egypt meanwhile are expected to receive volumes from the UK, Netherlands, and Belgium.

Conversely, imports to Europe will feel relatively more expensive as a result of local currencies depreciating against the dollar. The new Dunkirk terminal by the French and Belgian border welcomed its first commissioning cargo on 8 July. The cargo came aboard a Shell-chartered vessel from Nigeria.

While production from Nigeria is thought to be improving as planned maintenance at train six drew to a close, the market is preparing for between four and eight weeks of planned maintenance at Angola LNG.

In the Pacific basin, the Gorgon LNG plant remained offline for a second week after a gas leak on 1 July was initially assessed by the plant operator, Chevron, as requiring a single week for some minor repair work.

Other sellers profited from a rising market with one Australian producer selling an August cargo to an Asian buyer in the high $5.00s/MMBtu.

Also in mid-July, Japanese trader JERA sold a September cargo from Papua New Guinea to another buyer in Japan, also in the high $5.00s/MMBtu.

Aside from the outlook in the Atlantic basin, three concurrent tenders in India as well as demand to fill short positions in Egypt have all helped in driving prices higher. 

By Ludovic Aldersley

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About the Analyst

Ludovic Aldersley,
LNG Analyst, Global, ICIS

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 ICISÆs 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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