Asian spot LNG price may have seen winter peak amid steady demand

The price of spot LNG in Asia may have already peaked for the winter demand season, with major buyers likely to have already purchased sufficient cargoes to meet their needs.

While there is always the risk of an interruption to supply from unexpected plant stoppages, the market is indicating that the demand pull is likely over and supply remains plentiful.

The weekly spot price for Asia dropped to $6.40 per MMBtu in the seven days to Nov. 20, meaning it has slipped 14.7% since its high so far this year of $7.50 in the week to Oct. 30.

It’s worth noting that the decline from $6.85 per MMBtu came as the assessment switched from cargoes for December delivery to those for January arrival.

However, in a sign that the spot price can be swung by events, LNG futures in New York, which mirror the S&P Global Platts benchmark spot price for north Asia, ticked higher on Monday amid reports of supply outages.

LNG futures ended at $6.55 per MMBtu on Monday, up 2.7% from the prior close.

The increase came as Qatar, the world’s second-largest LNG exporter, was reported to have shut one of its production trains after a fault.

However, an outage at the Bintalu LNG plant in Malaysia has been resolved, while Chevron has restarted a production train at its Gorgon plant in Australia, although the company intends taking another train offline for maintenance.

Overall, the market appears well supplied, especially with the return of U.S. cargoes to Asian markets.

U.S. LNG exports totaled 3.6 million tons on 51 vessels in October, the most since May’s 3.71 million, according to vessel-tracking and port data compiled by Refinitiv.

November shipments are tracking around the same level as October, with 42 ships carrying 2.97 million tons departing up until Monday, a rate that if maintained would see about 3.87 million tons exported this month.

The U.S. figures are substantially up from the 1.9 million tons recorded in July, around the time when many Asian countries were locking down their economies in efforts to combat the spread of the novel coronavirus pandemic.

ASIAN BUYING

China, the world’s second-biggest LNG importer, has also returned as a buyer of U.S. LNG, with 565,000 tons aboard eight vessels having discharged so far in November, or expected to arrive by the end of the month, making it the highest month so far this year.

China’s total LNG imports in November are on track to be the highest since December 2019’s 7.14 million tons, with 7.1 million tons discharged, or awaiting discharge or in route to ports and expected to offload prior to month’s end.

Japan, the world’s biggest LNG importer, may see an increase in November arrivals, with 6.73 million tons discharged or likely to be offloaded by month’s end, up from 5.81 million in October.

South Korea, the third-biggest LNG buyer, is expecting November cargoes of 3.6 million tons, just short of the 3.85 million in October, which was the highest since February.

The shipping data does seem to indicate that Asia’s three biggest buyers are increasing their demand for the winter season, but not massively so.

If the spot price has peaked for the northern winter, it’s worth noting that it will be above the high of $6.80 per MMBtu for the winter of 2018-19, reached in mid-October of 2018.

This suggests that the market is finding more of a balance, although the ongoing over supply means spot prices may weaken substantially outside of the peak winter and summer demand periods.

Editing by Stephen Coates

 

 

 

 

 

 

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