28-08-2018

JKM Weekly: October LNG prices strong on supply outage, strong crude, NBP

Asian spot benchmark Platts JKM prices ended the week August 24 at $11.484/MMBtu for October deliveries, up 25.9 cents/MMBtu week on week, on strong crude oil and NBP prices, as well as supply outages.

Stronger crude and NBP prices across the week hoisted price expectations. Dated Brent crude prices rose $4.435/b across the week to end the week at $75.06/b. This significantly softened oil-slope equivalent levels from the high-15% at the start of the week to the low-15%.

Across the week, oil-slope equivalent levels softened and came in slightly below the top end of the seasonal average range. However, oil-slope levels in the low-15% start the week August 27 at the top end of the seasonal average range.

NBP month-ahead and two-month ahead prices both rose approximately 38 cents/MMBtu, narrowing the arbitrage gap to Northeast Asia to slightly below $3/MMBtu.

Supply side issues were significantly supportive across the week.

In Russia, Sakhalin LNG experienced a one-train production outage, project operator Sakhalin Energy confirmed. Market participants had earlier in the day Thursday, reported a possible one-train outage at Train 1 on August 20, with potential scheduling delays as well as potential production losses.

Market participants had also reflected that possibly one to three cargoes might have been secured on the prompt by an equity holder as well as an offtaker but details remained scarce.

In the Atlantic, market participants reported potential production issues at Sabine Pass LNG and Cove Point LNG, but were however, unsure of the extent of the impact on the market.

On tenders, Pertamina closed its tender on August 20 offering up to one cargo per month for October to December. Bids submitted into the tender will remain valid until September 20. India’s GAIL also closed a sell tender August 22 offering a cargo for loading from Sabine Pass. Angola issued a supply tender, offering an early October cargo and the tender closed August 23 with validity until August 24. Trinidad and Tobago issued a sell tender offering two cargoes for September 27 and September 28 loading, with bids due August 28. Nigeria issued a sell tender offering two cargoes for loading over September 10-12 and September 12-15. The tender was expected to close on August 28.

All eyes in the Pacific remain set on forward winter price expectations. Vitol Asia issued the first firm December bid on August 21, seeking a December 1-5 delivery into Japan or South Korea at $12.10/MMBtu. The trader subsequently submitted a firm bid on August 24 for December 1-5 delivery into Japan, South Korea, China or Taiwan at $12.70/MMBtu.

In the derivative markets, JKM derivative contracts for November, December and January ended the week at $12.15/MMBtu, $12.52/MMBtu, and $12.55/MMBtu respectively, after rising across the week.

Source: Platts

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