17 November 2016 | Ludovic Aldersley, ICIS LNG Analyst
Spot LNG prices in East Asia have inched higher over the last 30 days while European gas hubs have been more volatile.
The ICIS December East Asia Index (EAX) was assessed for the final time at $7.21/MMBtu on 15 November, having risen $0.36/MMBtu since becoming the front month on 17 October. The second front month contract, the January ‘17 EAX, closed at $7.33/MMbtu, representing a small $0.18/MMBtu rise.
A larger-than-expected round of purchases from South Korean incumbent, KOGAS set the tone in the second half of October. It purchased around 15 deliveries across December to February, up from only four that it had initially sought. Prices which were said to average around $7.00/MMBtu, appeared to be at a market discount for January but this was due to extra flexibility granted to sellers regarding discharge dates. Sellers were able to maintain East Asian offers in the mid $7.00s/MMBtu for outstanding demand until the end of October but had to abandon ideas of a $0.25/MMBtu contango between December and January as market attention turned to the second front month at the beginning of November.
The prospect of greater production as plants in Australia and the US ramp up after a string of maintenance outages was cited as one factor keeping a lid on the contango. Another was the mild winter weather forecasts for Japan. On the other hand, traders also pointed to possible weather-driven demand in late December and January from the Beijing and northern China markets.
Taiwan too, has so far been more active this winter than in previous years. Though not a typical seasonal spot importer, lower-than-expected nuclear power generation, like in South Korea, encouraged its state-owned buyer to purchase a December delivery around $7.20/MMBtu at the beginning of November.
As the EAX across both front months narrowed into the low-mid $7.00s/MMBtu range, various discussions for incremental supply to India also helped support the EAX. Indian buyers transacted for spot December and January volumes at or close to EAX levels in early November.
Around this period, large tenders for supplies to Egypt and Pakistan over the mid-term forward curve consumed significant attention from traders. Opportunities for optimisation among traders for near-term deliveries to Egypt, India, Pakistan, and South Korea were also present however. One example from analytics platform, LNG Edge, being the churn involved in these two deliveries to India and South Korea.
Re-exports, or diversions, from Europe appear still to have been in the money with the EAX Dec’16 holding a premium at or above $1.50/MMBtu to the Northwest Europe Index (NEX) for most of the period.
European gas hubs however, have been volatile with prices jumping, and then falling back, as winter supply profiles ease concerns over demand.
The front months on the British NBP jumped by around $0.50/MMBtu in early November, widening premiums to the Dutch TTF to about $0.60/MMBtu on 2 November.
The British premium over neighbouring Netherlands has been supported by a lack of available storage withdrawals over winter from the large-scale Rough site which has suffered extended outages in recent months.
There is currently only one Qatari cargo due to arrive in the UK over the coming weeks, according to ICIS LNG Edge. The platform shows as many as six Qatari vessels that usually deliver to the UK are either en route to, or from, East Asia.
By Ludovic Aldersley
LNG Analyst, Global, ICIS
Ludovic Aldersley has been involved in energy for eight years, and in LNG specifically, for over five. After spending two years in the upstream commercial department of a large gas producer, he switched to cover LNG for the market intelligence and price reporting agency, ICIS, formerly known as Heren.
From reporter to deputy editor of the flagship LNG publication, he covered all aspects of the global LNG value chain, from long-term sales and purchase agreements (SPA) to the single-cargo delivered ex-ship (DES) and free on board (FOB) spot market. Within the value chain, his specialisation has been on LNG shipping and the charter market.
From investigative journalism to analyst, he has become responsible for the improvement and maintenance of an analytics platform that launched in 2015 which fuses together three core strengths within ICIS Energy.
Ludovic 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, 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.
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Bearish European gas hubs keep re-load option open