LNG Markets Analysis: Asian LNG Price Rally Stalls Despite Plant Outages

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Apr 23, 2015, 04:05 ET

SINGAPORE, April 23, 2015 /PRNewswire/ --

Plant outages in the Middle East and Pacific basin failed to re-inject tautness into an abundantly supplied market as March's rally in LNG spot prices collapsed in early April. Mild spring weather and the ample availability of short-term contractual supplies were cited as weighing on sentiment.

The May '15 EAX contract closed at $6.90/MMBtu on 15 April, having risen to a peak of $7.856/MMBtu on 30 March. Overall, the May '15 shed a total of $0.413/MMBtu since opening as the front-month contract on 16 March.

The ICIS East Asia Index (EAX) is an arithmetic average of the DES (delivered ex-ship) front month and second month ahead assessments for Japan, South Korea, Taiwan and China. The index provides a measure of the commodity's value across the East Asia region and is a reliable LNG reference price for the region as it incorporates a wider pool of demand centres.

As the new front-month rolled over, sellers appeared confident of sustaining the rebound from the market's mid-February lows. The lowest offer for H1 May delivery into the region on 17 March was recorded at $8.00/MMBtu, the highest level since January. Buyers edged only slightly towards sellers as the highest bid for the same period was recorded at $7.25/MMBtu.

Traders cited competition in South America, where state gas company ENARSA issued a tender for 11 cargoes for delivery from April to June, as a factor supporting prices.

Availability on the prompt was also constrained by shoulder-period maintenance, as well as a brief weather-related outage at Pluto LNG and temporary shutdown at BG Group's QCLNG plant to bring the first train to full capacity. As such, some cargoes for April delivery were understood to be sold at over $8.00/MMBtu, reflecting a premium to expectations for May and June.

By late March, strengthening National Balancing Point (NBP) prices were also providing upward pressure on sentiment as buyers expressed concern at possible competition from new Floating storage regasification units (FSRUs) in Egypt and Pakistan for Atlantic basin cargoes.

But by the end of the month, waning demand and the onset of warmer-than-average weather reversed the trend. A combination of lower nominations under annual delivery programmes and expiring contracts left abundant volumes available at Pacific basin plants including Indonesia's Bontang, Indonesia's Tangguh and Russia's Sakhalin.

Read further breakdown of the recent trade activities through this article link - http://www.icis.com/press-releases/apr15-eax-lng-article/

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SOURCE ICIS