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JKM inches higher on firmer end May demand

Asia and Middle East LNG Market Update

April 12, 2017 - By Kenneth Foo, Luke Stobbart, Chris Pedersen

Asian LNG seaborne spot prices inched higher April 11 as a few Northeast Asian end-users indicated demand for end May spot cargoes.

The Platts JKM for cargoes to be delivered in May was assessed at $5.425/MMBtu April 11, up 2.5/MMBtu cents from Monday. The most competitive offers for H2 May were heard at $5.50/MMBtu, with the top bids for H2 May heard in the range of $5.30-$5.40/MMBtu.

The market was slightly more bullish this week on higher crude oil prices, as well as firmer spot demand from north and south Asia, according to market participants.

“There’s more demand from some north Asia buyers to take advantage of current [low] prices and fill their inventory levels,” a Northeast Asian buyer said.

South Korea’s SK Energy was reported to be scouring for at least two May delivery cargoes, while Japan’s Shikoku Electric Power was reported to be making inquiries for a H2 May shipment this week.

One trader said the latter’s requirement signaled early summer procurement by Japanese end-users, while a second Singapore trader queried Shikoku’s need for marginal spot cargoes given that its Ikata No. 3 nuclear reactor remained operational.

A local district court in western Japan on March 30 denied granting an injunction against the firm’s nuclear reactor.

Analysis continues below...

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On April 11, Pakistan’s Port Qasim LNG import cargo received its first cargo of LNG from the United States. The Shell-chartered Gaslog Skagen departed from Sabine Pass on March 15 and traveled through the Suez Canal.

Sources said persistently higher crude oil prices will likely stimulate near-term spot demand from price-sensitive buyers in India and the Middle East.

“Higher crude prices will raise our spot activity with the market switching to LNG in place of oil,” one Indian buyer said.

But another north Asian importer said there had been limited impact on LNG prices in recent days as LNG price movements “generally lag crude oil price moves by 1-2 weeks.”

The crude oil price increase is serving as only a “mild sentiment booster” for LNG, which could strengthen further if prices continue to rise.

However, there were still supply-driven headwinds, with strong Angola LNG supply and talk of a Gorgon Train 2 restart in one to two weeks.

One Singapore-based market source said that although there was uncertainty over Chevron’s Gorgon Train 2 restart date, market expectations were for it to come back online within the next one to two weeks.

In the Atlantic, production at Angola LNG appeared robust, with a third tender launched in the past seven days.

The company April 11 issued a single-DES cargo to load over April 16-18— which will not be allowed to deliver into North Asia, according to two sources. This tender will close April 18, with next-day validity.

The company has an ongoing tender that closes April 11, valid until April 19, for a May 26-28 loading shipment.

Market sources said that the company was looking to offer term contracts before the end of 2017, though details of those plans remained limited.

“The project is producing much more reliably now,” said a London-based market source. “So you could see them trying to offer term contracts in Q3 or Q4 this year.”

Angola LNG declined to comment.

In the Middle East, news that Egypt’s Egas was trying to defer 2017 cargoes into 2018 continued to be heard. The impetus behind the move is understood to be an increase in domestic gas production, particularly from the country’s North Alexandria Concession controlled by BP.

The number of cargoes that would be affected was unclear, with sources reporting that from 10 to more than 20 cargoes would be rolled into next year.

No immediate effect was reported on the price of prompt delivery cargoes into the Middle East.

In shipping, the Gaslog Salem was heard fixed by Brunei LNG to lift around April 26 for delivery into North Asia. This was part of a previous two-voyage vessel requirement that was delayed. Hire rate was heard to be in the low-$20,000s to low-$30,000s.

Also in this feature:
JKM swaps monthly liquidity report: Volume for 2017 JKM swaps to-date has exceeded half of 2016
LNG News: Australia lifts its LNG export forecast, but questions whether it will surpass Qatar

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