[LNG MARKET ANALYSIS ] 1 LNG Market Analysis LNG Market Analysis Volume: 6 th April 2018
[LNG MARKET ANALYSIS ] 2 LNG and Natural Gas Price Assessment 26 th March 6 th April 2018 LNG Analysis Global LNG prices remained stable to bearish as demand entered in shoulder season along with adequate supply outlook. Asian price closures on Friday; NE Asia for May closed at $7.13/MMBTU, whereas June prices closed at $7.26/MMBTU, while long-term contract prices are in the range of $8.13/MMBTU-$9.75/MMBTU. Japan received 1.60MMT (25 vessels), South Korea 0.86MMT (12 vessels), China 0.49MMT (7 vessels) and Taiwan 0.47MMT (7 vessels) during the week, NEA region represent 58.9% of a global trade this week. MTD April receipt: Japan 1.37MMT (21 vessels), South Korea 0.71MMT (10 vessels), China at 0.49MMT (7 vessels) & Taiwan 0.40MMT (6 vessels). Demand seems gearing up in South Asian market as there are news of shortage at coal based power plants in India, while summer season will increase demand in Pakistan. DES South Asia is calculated around $7.02/MMBTU for May & $7.20/MMBTU for June, whereas FOB ME estimated at $6.50/MMBTU & $6.62/MMBTU for May & June 2018 respectively. Brent based contract price is around $8.62/MMBTU on average for Pakistan and Henry Hub based prices for India at $6.84/MMBTU. India imported 0.38MMT (6 vessels), MTD 0.25MMT (4 vessels), while Pakistan received 0.17MMT (2 vessels) during the week, with MTD same as the week number. North West Europe LNG prices had a bearish run as weather remained mild along with regular arrivals of LNG vessels and improvement on pipelined gas supplies. NW Europe LNG price closure estimates on Thursday is $6.53/MMBTU for April and $6.20/MMBTU level
[LNG MARKET ANALYSIS ] 3 for May. 6 vessels left from Russian projects, two from Yamal projects for Belgium & France, while four from Sakhalin project for Japan & China. Six cargoes left from Sabine Pass export terminal during the week, four for China, one each for Netherlands & one location not communicated yet, there is one vessel at Cove Point terminal for loading. Five reload cargoes left the terminals with one each from Brazil, Japan, India, Singapore and Belgium. South West Europe prices also had a bearish run despite bullish Southern gas hub prices and low inventory level as hydro based power generation improved in Spain and weather outlook is for mild weather. SW Europe LNG price closure for the week is estimated at $6.74/MMBTU for April and $6.60/MMBTU level for May. Spain received 4 vessels, while UK 3, France & Italy 2 each, Netherlands 1 with Turkey receiving two cargoes during the week. US received one cargo while Chile received two cargoes. Arbitrage window for European reloads remained closed this week also as FOB prices for reload terminal are coming around $5.87/MMBTU France, $6.35/MMBTU Spain and $5.92/MMBTU UK. US Gulf Coast producer netback price for April delivery is $6.18/MMBTU based upon SW Europe price. US Henry Hub based price is coming around $5.61/MMBTU on Friday for US based liquefaction companies, which translate into margin of $0.26/MMBTU for NE Asian destination & $0.35/MMBTU for South Asia on June price basis, whereas $0.12/MMBTU for NW Europe and $0.57/MMBTU for SW Europe for May price. NEA May price around $7.20/MMBTU level is estimated to be 10.70% of Brent 3-0-1 basis. Author s Conclusion Crude oil price bearish fundamentals are primarily due to fear of trade ware between US and China along with rising US production, any resolution will support the prices, as other bullish factors are not impacting at the moment. In term of LNG, crude prices are also adding to bearish fundamentals as Brent pegged prices are higher than spot prices. European gas prices remained stable for forward months as it s a shoulder month, however lower inventory level and weather still volatile in NW Europe, due to low inventory level prices are expected to remain stable as there will be restocking inventory, however focus is on Sian LNG spot prices. Henry Hub prices still stable and HH based LNG prices still bringing positive margin for NE Asian and European destination. LNG prices seem to be bearish for the moment as adequate supply; weak demand and political uncertainty around the trade war are dictating the sentiments. Market is expected to pickup from June price for summer based demand generation. Market Analysis Weather North West Europe: NW Europe remained cold, however couple of degrees above seasonal limits and next week outlook is for cold to mild weather, above seasonal limits. South West Europe: SW Europe weather remained mild within seasonal limits, and outlook is for mild weather. South America: Warm weather with same outlook for next week. Middle East: Summers in Middle East. South Asia: Summer in full swing. North East Asia: Warm weather in the region except for Northern China and Japan, and outlook is for warm weather. South East Asia: Summer season. North America: Mexico in warm season. US weather; Mild to Cold weather in Northwest, Central, Midwest & Northeast, whereas mild to warm in Southern region, with same outlook for next week.
[LNG MARKET ANALYSIS ] 4 Crude Oil Crude oil started bearish and remained bearish through out the week due to US-China trade war fear, along with rising Russian production data, KSA price reduction announcement and EIA data on production. Bullish factors for coming week can be US tightening constraints on Iran, Permian basin pipeline capacity along with production compliance news from OPEC. EIA reported 4.62 million barrels surprised drawn down against expectation of 1.40 million barrel buildup, while gasoline inventory reported decrease of 1.11 million against market expectation of 1.26 million barrels draw down. Million Barrels (MBbl) 30-Mar-2018 23-Mar-2018 16-Mar-2018 09-Mar-2018 Production (MBbl/D) 10.460 10.433 10.407 10.381 Exports (MBbl/D) 2.175 1.578 1.573 1.487 Crude Inventory 425.3 429.9 428.3 430.9 Gasoline Inventory 238.5 239.6 243.1 244.8 US production stands at 10.46 million barrels/day, increased by 1.27 million barrels from last year. With inventory increasing at Cushing by 3.7 million barrels from last week and stands at 34.9 million barrels. US weekly export number stands at all the high of 2.175 million barrels, while imports decreased by 0.25 million barrels to 7.9 million barrels per day. Brent prices closed at $66.93/BBL, while WTI closed at $61.95/BBL, with Brent-WTI spread at $4.98/BBL on Friday. Future market closure on Friday for Brent front month at $68.33/BBL, with $67.90/BBL & $67.45/BBL for July & August, whereas WTI front month at $61.95/BBL with $61.96/BBL for June & $61.88/BBL for July. Long-term backwardation emphasizing long-term oversupply fundamentals. Baker Hughes oil-rig count increased by 11 and now stands at 808. Natural Gas US Natural gas prices had a stable to bearish run due to milder weather, reduced demand and increased rig numbers. EIA reported working gas in storage is 1,383 BCF as of Friday, 23 rd March 2018, net decrease of 63 BCF; against expectations of 75 BCF draw down. Overall supply remained same at 85.8 BCF/Day as last week. With net import from Canada at 6.1 BCF/Day reduced by 0.3 BCF/day from last week. Demand decreased substantially from 87.9 BCF/Day of last week, to 83.9 BCF/Day, Industrial and residential sector demand down by 3.8 BCF/Day as weather remained mild in Southern region. Baker Hughes reported no increase in gas rigs and total number stands at 194. Henry Hub closure on Thursday at $2.70/MMBTU, with future market closed at $2.69/MMBTU for May, $2.74MMBTU for June & $2.80/MMBTU for July, expecting warm season demand. North West European gas hub prices remained mixed, as lower inventory level, revised weather outlook and unplanned outage from pipeline gas supply kept prices range bound. Gas flow from Norway reduced due to unplanned outage at Gullfaks and month long shut down of St Fergus, while Russian gas flow remained regular. Gas inventory level still are low in NW Europe with Belgium at 5%, Germany 15% and Netherlands at 7% & UK at 18%. UK Spot gas price closed at 49.18P/Thm ($6.93/MMBTU) on Friday, with front month April at 46.96 Pence/Thm ($6.59/MMBTU. Dutch Spot price closed at 19.02/MWH ($6.85/MMBTU), whereas front month price closed at 18.17/MWH ($6.53/MMBTU) on Thursday. SW Europe gas hub prices remained stable as weather
[LNG MARKET ANALYSIS ] 5 remained mild with reduced Norwegian gas flows, lower gas inventory level of 4% in France along with reduced nuclear power generation. Spain hydro-based electricity generation increased to 9.67 TWH from 9.41 TWH last week, last year the number was at 8.20 TWH. French Day Ahead prices: Northern France gas prices closed at 19.03/MWH ($6.85/MMBTU) whereas Southern France gas prices closed at 22.33/MWH ($8.04/MMBTU) on Friday. Italian gas prices closed at 21.30/MWH ($7.47/MMBTU) and Iberian Gas Day Ahead price at 21.70/8MWH ($7.81/MMBTU). Front month Northern France gas prices remained bearish with closure at 18.40/MWH ($6.60/MMBTU), while Southern France had a bullish run and closed at 19.18/MWH ($6.87/MMBTU), Italian gas curve prices closed at 20.22/MWH ($7.29/MMBTU), whereas Iberian gas forward price on Thursday at 19.70/MWH ($7.06/MMBTU). Weekly European Gas and LNG quantities at Storage and LNG terminals (BCF) One standard size Vessel of 150,000 m 3 equals to 3.42 BCF. Quantity in BCF 06- Apr- 18 30- Mar- 18 23- Mar- 18 16- Mar- 18 Belgium France Germany Greece Italy Lithuania Netherlands Poland Portugal Spain UK Gas 0.38 0.63 0.75 1.60 LNG 1.44 2.24 2.75 0.60 Total 1.83 2.87 3.49 2.20 Capacity Utilization 5% 7% 9% 6% Gas 13.39 13.67 17.87 33.47 LNG 7.61 6.64 4.63 7.76 Total 21.01 20.31 22.50 41.23 Capacity Utilization 4% 4% 5% 8% Gas 122.17 120.98 128.47 157.00 LNG - - - - Total 122.17 120.98 128.47 157.00 Capacity Utilization 15% 15% 16% 20% Gas - - - - LNG 2.19 2.20 2.25 2.35 Total 2.19 2.20 2.25 2.35 Capacity Utilization 82% 82% 84% 87% Gas 230.03 221.23 226.00 239.26 LNG 2.59 3.43 2.97 5.64 Total 232.62 224.66 228.97 244.90 Capacity Utilization 35% 34% 34% 37% Gas - - - - LNG 0.91 1.57 1.85 2.17 Total 0.91 1.57 1.85 2.17 Capacity Utilization 26% 46% 54% 63% Gas 30.87 29.96 38.36 52.93 LNG 2.00 0.30 0.25 0.33 Total 32.87 30.26 38.61 53.26 Capacity Utilization 7% 7% 8% 12% Gas 41.36 40.87 41.92 44.78 LNG 2.45 4.37 2.15 4.38 Total 43.82 45.24 44.08 49.15 Capacity Utilization 37% 38% 37% 41% Gas 6.19 5.44 5.18 5.48 LNG 2.91 4.99 3.93 2.19 Total 9.09 10.43 9.11 7.68 Capacity Utilization 45% 52% 45% 38% Gas 62.69 59.90 59.73 60.37 LNG 20.68 17.09 20.24 18.30 Total 83.38 77.00 79.97 78.67 Capacity Utilization 47% 44% 45% 45% Gas 1.91 3.46 3.41 14.14 LNG 10.02 8.55 5.32 7.82 Total 11.93 12.01 8.74 21.96 Capacity Utilization 18% 18% 13% 33%
LNG Trade Flows 31 st March 6 th April 2018 LNG merchant data is developed in collaboration with Clipper Data LLC Supply Trade Flows 101 vessels carrying 6.47 million tons (311.1 BCF) left supply terminal centres. [LNG MARKET ANALYSIS ] 6 Demand Trade Flows 87 vessels carrying 5.81 million tons (279.1 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.