Oversupply pushes Asian spot LNG prices down

Asian spot prices fell in the first half of October as the region struggled to absorb abundant supply of liquefied natural gas from the Pacific basin amid weak demand fundamentals, reveals the ICIS East Asia Index (EAX).

The November ’14 East Asia Index (EAX) was assessed at $13.950/MMBtu on 15 October, having shed $0.775/MMBtu from a high point of $14.725/MMBtu on 29 September. This represented a $0.588/MMBtu loss since the contract rolled to become the front month on 16 September. December EAX was assessed at $14.468/MMBtu on 15 October, having fallen by $0.307/MMBtu since 16 September.

As the new contract month began in mid-September, sellers cited the high cost of marginal supply from the Atlantic basin in pushing to extend the rally that began in late July. FOB (free on board) prices remained around $13.000/MMBtu in the Atlantic basin, while opportunities from the usual sources of Nigeria and Trinidad remained limited.

Many of Japan’s larger utility buyers remained out of the market because of ample inventories and predictions of mild October weather. South Korea’s Kogas continued its attempts to enter into swap arrangements by offering prompt volumes to the market in return for receiving volumes later in the winter. However, smaller Japanese utilities and a number of Chinese buyers had expressed interest for November deliveries.

On 26 September, the highest bid for delivery in the second half of November was recorded at $14.600/MMBtu into Japan, while the lowest offer for the same delivery period was heard at $15.100/MMBtu.

By late September, the emergence of abundant supply from within the Pacific basin acted to cap any price rises. The North West Shelf project in Australia, the ExxonMobil-operated PNG LNG project and Abu Dhabi’s ADGAS opened tenders to sell at least four cargoes for November delivery. Indonesia’s Bontang LNG export plant also closed a tender for the delivery of up to six cargoes on a prompt basis, while the BP-operated Tangguh project on the Indonesian island of West Papua was heard to be marketing four early winter spot cargoes. These cargoes were released to the market because of a delay to the start-up of the Lampung floating terminal off the coast of southern Sumatra.

Press Release; Image: NWS LNG