27-08-2016

GLOBAL LNG-Asian prices steady as spot cargo fetches high rate amid glut

LNG

Asian spot liquefied natural gas (LNG) prices held steady in the absence of any decisive indicators, with a lone deal being done at a higher-than-expected level in an amply supplied market.

Prices for October-delivery LNG to Northeast Asia were valued at around $5.50 per million British thermal units, unchanged from last week’s levels, traders said.

A spot deal for an early October-loading Australian North West Shelf (NWS) LNG cargo was done via a sell tender issued by BHP Billiton this week at around $5.40 per million British thermal units on a free-on-board basis.

Traders said the deal, factoring in freight, would be equivalent to around $5.80 per million British thermal units on a delivered basis to Northeast Asia, but added that prices in the region were below those levels.

A Singapore-based trader said the buyer bid aggressively for the cargo, likely to “cover a short” in required supplies after buying a Nigerian cargo earlier.

Supply disruptions in Nigeria have forced traders who usually take West African cargoes to seek alternative sources for replacements.

Traders also said that the NWS deal was more expensive than expected as a September-loading supply overhang was generally weighing on prices.

Tenders offering two September-loading Australian Darwin LNG cargoes and a separate tender offering two Trinidad and Tobago LNG cargoes closed this week. Reuters was not able to establish the tender award details.

However, traders said that they expected these cargoes to be awarded at lower prices than the October-loading NWS deal.

Given a general supply overhang, Asia-Pacific LNG producers are looking at new means of marketing their cargoes and are exploring multi-year contracts for sales of spot cargoes.

ExxonMobil Corp’s Papua New Guinea LNG project is eyeing such contracts to soak up excess production, co-owner Oil Search said on Tuesday.

The new contract types come as buyers are reluctant to commit to traditional long-term contracts as a supply glut in the LNG market offers them greater sourcing options and wears down their concerns over supply security.

Simultaneously, producers are unwilling to market their surplus cargoes on the spot market because of depressed prices.

Supply and demand fundamentals could, however, be inching towards equilibrium as emerging countries like Egypt and Pakistan import more of the super-cooled fuel.

Pakistan, which is moving towards becoming a key LNG buyer, recently signed a deal to purchase a Floating Storage and Regasification Unit for its second import terminal.

Source: Reuters

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