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GLOBAL LNG-Asian demand weakens as shoulder season kicks in

Published 24/02/2017, 07:49 pm
GLOBAL LNG-Asian demand weakens as shoulder season kicks in
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By Mark Tay and Oleg Vukmanovic

SINGAPORE/MILAN, Feb 24 (Reuters) - Asian spot LNG prices extended their losses for a seventh straight week as demand from key markets in North Asia dipped amid forecasts of a warmer-than-average spring.

Spot prices for liquefied natural gas (LNG) for April delivery LNG-AS were pegged at about $6.20 per million British thermal units (mmBtu), about 20 cents below last week's levels, according to traders surveyed by Reuters.

"There is no demand as of now," a Singapore-based trader said, referring to Japanese and South Korean demand for April cargoes of the supercooled fuel. "They will definitely use some of the downward quantity tolerances (DQT)."

DQTs are provisions in contracts that allow buyers to purchase less volumes of LNG than their full annual contract quantity without incurring sanctions.

Japan will see average to warmer weather from March to May, the official forecaster said on Friday. Eastern Japan, including the most densely populated Tokyo area, will have a 40 percent chance of average temperatures for the period, the Japan Meteorological Agency said in its monthly three-month forecast. state-run energy firm Enarsa awarded a tender seeking nine cargoes of LNG for April and May delivery this week. Spain's Gas Natural Fenosa won the right to supply five cargoes, while the remaining four cargoes are likely to be supplied by trading firms.

Cargoes for delivery to Bhia Blanca were awarded at premiums of about 20 to 30 cents to the UK NBP benchmark, traders said. In comparison, Enarsa had previously awarded its April-August import tender at higher premiums of about 30 to 40 cents to NBP for cargoes to Bhia Blanca.

LNG prices are under pressure amid rising supplies of spot cargoes as projects offer spot buyers volumes that would have otherwise been shipped to term customers, traders said.

Exxon (NYSE:XOM) Mobil's Papua New Guinea liquefied natural gas (PNG LNG) export facility is seeking to sell six cargoes for delivery between May and October via tender.

"It's also a bearish sign that PNG is trying to sell so many ... it suggests expected demand from the plant's long-term customers in Japan, Taiwan and others is weak," one source said earlier this week. at the 6.9 million tonnes a year PNG LNG plant are Tokyo Electric Power Company, Osaka Gas, Taiwan's CPC and China's Sinopec.

Muted Asian demand coupled with rising spot offers are countering production issues that arose at Nigeria LNG and Chevron (NYSE:CVX)'s Gorgon LNG project in Australia this week. sources have shrugged off the production issues as the Nigeria LNG project is fed by two pipelines, one of which remains operational.

"It is too early (to tell) and I guess the price may not increase that much ... as normally April and May is shoulder seasons," the trader said, referring to news about Gorgon.

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