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LNG Market Analysis  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 LNG  Market  Analysis  Volume:  30th  March  2018  

           

 

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LNG Price Assessment and Natural Gas 24th – 29th March 2018

LNG Analysis • Global LNG prices remained bearish in Asian demand region, whereas European markets remained

bullish. • Asian LNG prices bearish trend is attributed on mild to warm weather in NE Asia demand block, weak

domestic prices in China, adequate supply and resumption of nuclear reactors in Japan. • Demand seems weak in South Asian market as Pakistan already reduced LNG imports and India is in the

market to buy lowest prices cargoes with adequate receipts. • As per liquefaction forecast model, next week cargoes readiness from Equatorial Guninea, UAE, Oman,

Norway, Russia Yamal & Cove Point US atleast one cargo each, two cargoes from Brunei, Peru, Russia Sakhlin, while 4 cargoes from Sabine Pass US, while regular supplies from Nigeria, Qatar, Australia, Malaysia and Indonesia.

• Asian price closures on Friday; NE Asia for April closed at $7.21/MMBTU, whereas May prices closed at $7.06/MMBTU, while long-term contract (2014 basis) price at $9.62/MMBTU & recent long term contract price of 11.1% Brent at 8.03, higher than spot prices.

• Japan received 1.70MMT (27 vessels), South Korea 0.77MMT (11 vessels), China 0.82MMT (12 vessels) and Taiwan 0.27MMT (4 vessels) during the week, NEA region represent 61.2% of a global trade this week.

• MTD March receipt: Japan 7.70MMT (126 vessels), South Korea 4.49MMT (65 vessels), China at 3.34MMT (47 vessels) & Taiwan 1.40MMT (21 vessels).

• DES South Asia is calculated around $7.00/MMBTU for April & $6.89/MMBTU for May, whereas FOB ME

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estimated at $6.56/MMBTU & $6.41/MMBTU for April & May 2018 respectively. Brent based contract price is around $8.80/MMBTU for Pakistan and Henry Hub based prices for India at $6.90/MMBTU.

• India imported 0.49MMT (7 vessels), MTD 2.04MMT (26 vessels), while Pakistan received 0.16MMT (2 vessels) during the week, with MTD at 0.60MMT (8 vessels).

• North West Europe LNG prices had a stable to bearish run as overall gas inventory still low across whole Europe with reduced pipe lined gas supplies from Norway and Russia.

• 6 vessels left from Russian projects, two from Yamal projects for Netherlands & Spain, while five from Sakhalin project for Japan, India, China & Mexico.

• NW Europe LNG price closure estimates on Thursday is $6.43/MMBTU for April and $6.27/MMBTU level for May.

• South West Europe prices had a stable run due to bullish Southern gas hub prices and low inventory level. • SW Europe LNG price closure for the week is estimated at $6.77/MMBTU for April and $6.63/MMBTU

level for May. • France received 6 vessels, Spain 3, Italy 2 & UK 2 while Finland, Poland & Portugal one each. • Mexico received 3 vessels while Chile and Brazil one each. • Arbitrage window for European reloads remained closed this week also as FOB prices for reload terminal

are coming around $6.01/MMBTU France, $6.42/MMBTU Spain and $5.93/MMBTU UK. • US Gulf Coast producer netback price for April delivery is $6.13/MMBTU based upon SW Europe price. • US Henry Hub based price is coming around $5.65/MMBTU on Thursday for US based liquefaction

companies, which translate into negative margin of $0.06/MMBTU for Asian destination, $0.12/MMBTU for NW Europe and $0.37/MMBTU for SW Europe for May price.

• Five cargoes left from Sabine Pass export terminal during the week, two for China, one each for Japan, India & Mexico.

• NEA May price around $7.00/MMBTU level is estimated to be 10.55% of Brent 3-0-1 basis.

Author’s Conclusion • Crude prices are showing stability at current level despite increase in US production due to OPEC production

cut commitments along with geo-political tension between Iran-KSA. We expect price to remain range bound next week and impact on LNG prices are minimal as LNG spot prices are lower than Brent based prices and expected to remain low during the current season.

• European gas hub prices remained stable to bullish due to lower inventory level, reduced gas flows along and still cold weather in NW Europe, however there are number of cargoes lined up for European destinations, and we expect prices to remain bearish in the coming week due to mild weather outlook. Henry hub prices still at a level where it’s bringing positive netback for US producers and to compete with Algerian, Norwegian and Russian cargoes.

• LNG prices remained bearish in Asian market, where as stable in European market; fundamentals like adequate supply, mild weather and bullish crude prices are pushing spot prices further down. Bearish market sentiments prevailing due to additional cargoes supply from Yamal and Cove Point, higher Brent based LNG prices, nuclear plant startups & weak domestic prices in China.

Market Analysis Weather • North West Europe: NW Europe region weather remained cold with UK and Germany colder than seasonal

limits over the weekend; outlook is for within seasonal limits cold weather. • South West Europe: SW Europe weather remained mild with temperature hovering above seasonal limits with

same outlook for next week. • South America: Warm weather in South America with exception of Colombia, which is still mild. • Middle East: Summers in Middle East. • South Asia: Summer in full swing. • North East Asia: Warm, above seasonal limits weather in Japan, China and South Korea, with Taiwan usually

warm, outlook is for warm weather across North East Asia region. • South East Asia: Summer season. • North America: Mexico in warm season. US weather; Cold weather in Northwest, Central, Midwest &

Northeast still in cold weather region with same outlook for next week, warm weather prevailing in Southeast, South, Southwest and West regions.

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Crude Oil • Crude oil prices continued the bearish run from last Friday till mid of the week, with bearish factors in play like

increased US production, last week US rig numbers, weekly EIA data. The prices got support from Iran-KSA tension escalation on Yemen missile attacks and news from OPEC on production cut continuity and possible extension in 2019.

• EIA reported 1.64 million barrels surprise build-up against expectation of 0.28 million barrel drawdown, while gasoline inventory reported a decrease by 3.47 million against market expectation of 1.95 million barrels draw down.

• US production stands at 10.43 million barrels/Day, increased by 1.28 million barrels from last year. With inventory increasing at Cushing by 1.80 million barrels from last week and stands at 31.2 million barrels

• US weekly export number stands at 1.578 million barrels, increased by 5,000 barrels per day.   • Brent prices closed at $70.22/BBL, while WTI closed at

$64.94/BBL, with Brent-WTI spread at $5.28/BBL on Friday.  

• Future market closure on Thursday for Brent front month at $69.41/BBL, with $68.89/BBL & $68.21/BBL for July & August, whereas WTI front month at $64.91/BBL with $64.89/BBL for June & $64.50/BBL for July.

• Still long-term over-supply fundamentals dictating the backwardation in Brent & WTI future market.

• Baker Hughes oil-rig count decreased by 7 and now stands at 797.

Million Barrels (MBbl) 23-Mar-2018   16-Mar-2018   09-Mar-2018   02-Mar-2018  Production (MBbl/D) 10.433 10.407 10.381 10.369 Exports (MBbl/D) 1.578   1.573   1.487   1.498  Crude Inventory 429.9   428.3   430.9   425.9  Gasoline Inventory 239.6   243.1   244.8   251.0  

Natural Gas • US Natural gas prices had a bullish run through out the week as demand is expected to be strong for heating

and cooling due to cold weather in Northern states while warm weather in South is creating demand for air-conditioning despite reduction in supply as demand also decreased during last week.

• EIA reported working gas in storage is 1,383 BCF as of Friday, 23rd March 2018, net decrease of 63 BCF; against expectations of 75 BCF draw down.  

• Overall supply increased to 85.2 BCF/Day from 86.2 BCF/Day of last week. With net import from Canada at 6.4 BCF/Day reduced by 0.5 BCF/day from last week.

• Demand decreased substantially from 90.9 BCF/Day of last week, to 87.8 BCF/Day, Industrial and residential sector demand down by 2.7 BCF/Day as weather remained mild to warm in Southern states.

• Baker Hughes reported an increase in gas rigs by 4 and total number stands at 194. • Henry Hub closure on Thursday at $2.74/MMBTU, jump by 0.15/MMBTU from last week, with future

market closed at $2.73/MMBTU for May, $2.77MMBTU for June & $2.83/MMBTU for July, emphasizing on summer season demand.

• North West European gas hub prices remained stable during the week, with bullish factors supporting prices were crude bullish run along with reduced gas flow from Russia and Norway, and low inventory level across Europe.

• Gas flow from Norway reduced due to issue at Heimdal and Nyhama gas field along with a month shut down of St Fergus.

• Russian gas flow remained low by approximately 4% from Nel has added to bullish sentiments.

• Gas inventory level are drifted lower in Belgium at 7%, Germany 15% and Netherlands at 7% of total storage capacity, with UK increased from 14% to 18%, due to

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arrival of two cargoes and two more vessels arriving on 1st April 2018. • UK Spot price closed at 49.75P/Thm ($6.98/MMBTU) on Friday, with front month April at 47.75

Pence/Thm ($6.70/MMBTU) on Thursday. • Dutch Spot price closed at €19.39/MWH ($7.00/MMBTU), whereas front month price closed at €18.22/MWH ($6.57/MMBTU) on Thursday.

• SW Europe gas hub prices remained stable as weather is getting warmer and Southern France gas hub prices remained bullish due to extremely low gas inventory level while nuclear and hydro based power generation remained adequate.

• Gas inventory level stand at 4% of total capacity in France despite 4 LNG cargoes arrived during the week. • Spain hydro-based electricity generation increased to 8.62 TWH from 7.34 TWH last week, last year the

number was at 8.253 TWH. • French Day Ahead prices: Northern France gas prices closed at €18.78/MWH ($6.78/MMBTU) whereas

Southern France gas prices closed at €20.80/MWH ($7.51/MMBTU) on Friday. Italian gas prices closed at €20.52/MWH ($7.27/MMBTU) and Iberian Gas Day Ahead price at €18.43/8MWH ($6.65/MMBTU).

• Front month Northern France gas prices remained bearish with closure at €18.47/MWH ($6.66/MMBTU), while Southern France had a bullish run and closed at €19.07/MWH ($6.88/MMBTU), Italian gas curve prices closed at €20.24/MWH ($7.30/MMBTU), whereas Iberian gas forward price on Thursday at €19.35/MWH ($7.04/MMBTU).

Weekly European Gas and LNG quantities at Storage and LNG terminals (BCF) One standard size Vessel of 150,000 m3 equals to 3.42 BCF.

Quantity  in  BCF   30-­‐Mar-­‐18   23-­‐Mar-­‐18   16-­‐Mar-­‐18   9-­‐Mar-­‐18  

Belgium  

Gas   0.63   0.75   1.60   2.39  LNG    2.24      2.75      0.60      1.11    Total    2.87      3.49      2.20      3.50    Capacity  Utilization   7%   9%   6%   9%  

France  

Gas    13.67      17.87      33.47      42.23    LNG    6.64      4.63      7.76      3.28    Total    20.31      22.50      41.23      45.51    Capacity  Utilization   4%   5%   8%   9%  

Germany  

Gas    120.98      128.47      157.00      168.72    LNG    -­‐      -­‐      -­‐      -­‐    

Total    120.98      128.47      157.00      168.72    Capacity  Utilization   15%   16%   20%   21%  

Greece  

Gas    -­‐          -­‐          -­‐          -­‐        LNG    2.20      2.25      2.35      2.41    Total    2.20      2.25      2.35      2.41    Capacity  Utilization   82%   84%   87%   90%  

Italy  

Gas    221.23      226.00      239.26      252.08    LNG    3.43      2.97      5.64      3.17    

Total    224.66      228.97      244.90      255.25    Capacity  Utilization   34%   34%   37%   38%  

Lithuania  

Gas    -­‐          -­‐          -­‐          -­‐        LNG    1.57      1.85      2.17      0.51    Total    1.57      1.85      2.17      0.51    Capacity  Utilization   46%   54%   63%   15%  

Netherlands  

Gas    29.96      38.36      52.93      61.55    LNG    0.30      0.25      0.33      0.56    Total    30.26      38.61      53.26      62.11    Capacity  Utilization   7%   8%   12%   14%  

Poland  

Gas    40.87      41.92      44.78      46.33    LNG    4.37      2.15      4.38      1.35    Total    45.24      44.08      49.15      47.68    Capacity  Utilization   38%   37%   41%   40%  

Portugal  

Gas    5.44      5.18      5.48      5.39    LNG    4.99      3.93      2.19      3.98    Total    10.43      9.11      7.68      9.37    Capacity  Utilization   52%   45%   38%   46%  

Spain  

Gas    59.90      59.73      60.37      60.38    LNG    17.09      20.24      18.30      20.53    Total    77.00      79.97      78.67      80.91    Capacity  Utilization   44%   45%   45%   46%  

UK  

Gas    3.46      3.41      14.14      4.74    LNG    8.55      5.32      7.82      6.32    Total    12.01      8.74      21.96      11.06    Capacity  Utilization   18%   13%   33%   16%  

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LNG Trade Flows 24th– 30th March 2018 LNG merchant data is developed in collaboration with Clipper Data LLC Supply – Trade Flows • 91 vessels carrying 6.02 million tons (289.4 BCF) left supply terminal centres.

Demand – Trade Flows • 91 vessels carrying 5.83 million tons (280.0 BCF) reached demand centres.

W-Country- within same country delivery & TBC – To Be Communicated

 Disclaimer:  This  is  a  personal  analysis  based  upon  public  information  and  should  not  be  used  for  buying  and  selling  of  commodities.  Source:  EIA,  REE  &  GIE.