[LNG MARKET ANALYSIS ] 1 LNG Market Analysis LNG Market Analysis Volume: 8 th June 2018
LNG and Natural Gas Price Assessment 28 th May 8 th June 2018 [LNG MARKET ANALYSIS ] 2 LNG Analysis Stable to bullish crude, soaring coal prices along with summer based buying sentiment in Asian market & production issues at few liquefaction projects kept the prices up. Planned maintenance schedule for Sakhalin and Angola, along with news of production issues at Bintulu & Sabine had a bullish sentiment in the market. Demand is stable from South America, South Asia and Middle East due to weather-based requirement. As per internal projection models, 83 vessels are expected to load cargoes during 8 th 14 th June 2018 period, whereas 93 laden vessels will be discharging during the same period. Asian price closures on Friday; NE Asia for July closed at $9.85/MMBTU, whereas August prices closed at $9.96/MMBTU, while long-term contract prices are in the range of $8.71/MMBTU-$10.44/MMBTU. Product receipt during last week, Japan received 1.24MMT (20 vessels), South Korea 0.83MMT (13 vessels), China 0.97MMT (14 vessels) and Taiwan 0.28MMT (4 vessels) during the week, NEA region represent 55.8% of a global trade this week. MTD June receipt: Japan 1.65MMT (26 vessels), South Korea 1.09MMT (16 vessels), China at 1.13MMT (17 vessels) & Taiwan 0.33MMT (5 vessels). DES South Asia is calculated around $9.65/MMBTU for July & $9.75/MMBTU for August, whereas FOB ME estimated at $9.05/MMBTU & $9.16/MMBTU for July & August 2018 respectively. Brent based contract price is around $9.24/MMBTU on average for Pakistan and Henry Hub based prices for India at $7.26/MMBTU.
[LNG MARKET ANALYSIS ] 3 India imported 0.40MMT (6 vessels), MTD 0.46MMT (7 vessels), while no vessel for Pakistan during the week, with MTD 0.07MMT (1 vessel). Mild weather outlook along with bullish Asian LNG prices supported by bullish crude and coal prices kept NW Europe LNG prices bullish. NW Europe LNG price closure at $8.27MMBTU for July and $8.38/MMBTU level for August. Five vessels are due to reach UK, Netherlands and Belgium during next one week. Bullish prices in SW Europe, following the same premise as NW Europe in addition to summer based demand with price closure for the week is estimated at $8.56/MMBTU for July and $8.67/MMBTU level for August. Prices for Mediterranean region are around $9.88/MMBTU for July and $9.95/MMBTU for August. Nine vessels are due to reach France, Spain and Italy during next one week. Four vessels left from Russian projects with three from Sakhalin project & one from Yamal project, while four cargoes left from Sabine Pass export terminal during the week. France received 5, UK 4, Netherlands 3, Spain 2, while Belgium, Portugal & Italy one each during the week. Turkey also received one cargo during the week. Argentina received 3 cargoes while Chile & Brazil received one cargo each during the week. Two reload cargoes left during the week, one from Netherlands to Turkey and other from South Korea to Japan. Arbitrage window is widening for European reloads for South Asia & North East Asian destinations, as reload prices coming around or South Asia and NE Asia at: UK $8.65/MMBTU & $8.27/MMBTU, France $8.85/MMBTU & $8.39/MMBTU, Spain $8.80/MMBTU & $8.39/MMBTU, with maximum margin for South Asia and Mediterranean destinations. US Henry Hub based price is $5.84/MMBTU for US based liquefaction companies, which translate into margin of $2.57/MMBTU for NE Asia & $2.39/MMBTU for South Asia, whereas $1.70/MMBTU for NW Europe and $2.05/MMBTU for SW Europe. NEA July price around $9.85/MMBTU level is estimated to be 13.68% of Brent 3-0-1 basis. Author s Conclusion Crude prices still in stable zone with current Brent based prices now more attractive than Spot prices, we expect buyers to focus more on maximizing their contractual buying, and any further downward crude price movement will keep LNG prices on check once supply constraint issue on LNG resolved. Range bound Henry Hub stable prices still very attractive for US liquefaction projects as bullish Asian and European LNG prices are improving margin. European gas hub prices remained stable, however Asian prices now dictating European LNG prices. Bullish LNG prices are primarily due to strong summer demand from Asian region, supported by production issues at number of export facilities, bullish crude and coal prices. We expect market to remain stable to bullish next week. Market Analysis Weather North West Europe: Outlook is mild to warm weather, still above seasonal limits. South West Europe: Above seasonal limit warm weather outlook. South America: Cold weather outlook, except for Brazil. Middle East: Hot weather outlook South Asia: Summer in full swing. North East Asia: Warm weather outlook. South East Asia: Summer. North America: Summer in Mexico. US weather; Warm weather outlook across US. Crude Oil Crude oil remained stable to bearish as higher US production and increased US inventory remained the bearish factor, whereas Venezuela production issue kept the prices stable. Market participants still waiting for 22 nd June OPEC and Russia meeting with expectation of reduction in production cut which may have bearish impact oil prices.
[LNG MARKET ANALYSIS ] 4 US export constraint on terminals and pipeline weighing on WTI prices as Brent-WTI spread remained above $10/BBL. US Inventory data with more than expected drawdown numbers void the increased US production sentiments. Million Barrels (MBbl) 1-June-2018 25-May-2018 18-May-2018 11-May-2018 Production (MBbl/D) 10.800 10.769 10.725 10.723 Exports (MBbl/D) 1.71 2.17 1.75 2.56 Crude Inventory 436.6 434.5 438.1 432.4 Gasoline Inventory 239.0 234.4 233.9 232.0 EIA reported 2.1 million barrels surprise build-up against expectation of 2.0 million barrels drawdown, while gasoline inventory reported an increase by4.6 million barrels against expectation of 0.60 million barrels buildup. US production touched 10.80 million barrels/day, increased by 31,000 barrels from last week. US weekly export at 1.72 million barrels/day, while imports at 8.34 million barrels per day. Brent prices closed at $76.39/BBL, while WTI closed at $65.62/BBL, with Brent-WTI spread at $10.77/BBL on Friday after touching $11.36/BBL Future market closure on Friday for Brent front month at $76.10/BBL, with $75.81/BBL for October & $75.44/BBL for November, whereas WTI at $65.52/BBL for August, with $65.24/BBL & $64.91/BBL for September & October respectively. Overall forward market still in backwardation as oversupply situation due to increased US production still dictating the sentiments. Baker Hughes oil-rig count increased by 1 with total count at 862. Supply Outlook (8 th 14 th June 2018) As per forecast model, supply seems lower due to production issues at Bintulu, Cheniere & Qatrgas with 83 vessels expected to load cargoes. Project Name Cargoes Project Name Cargoes Project Name Cargoes Project Name Cargoes ADNOC LNG 2 Cove Point LNG 3 Oman LNG 2 Snohvit LNG 1 Angola LNG 2 Darwin LNG 1 Papua New Guinea LNG 2 Tangguh LNG 1 AP LNG 1 Donggi Senoro LNG 1 Peru LNG 2 WheatStone LNG 2 Arzew Terminal 3 Equatorial Guinea LNG 1 Petronas Bintulu Complex 8 Yamal LNG 1 Atlantic LNG 4 Gladestone LNG 1 Pluto LNG 1 Bontang LNG 1 Gorgon LNG 3 Qatar Gas 17 Brunei LNG 4 Nigeria LNG 5 Queens Land Curtis LNG 1 Cheniere LNG 4 North West Shelf LNG 4 Sakhalin LNG 5 Demand Outlook (8 th 14 th June 2018) As per forecast model, outlook for at least 93 vessels to arrive at different import terminals. Country Cargoes Country Cargoes Country Cargoes Country Cargoes Country Cargoes Argentina 2 Dominican Republic 1 Japan 24 Spain 4 Belgium 1 Egypt 3 Lithuania 1 Sweden 1 Brazil 2 France 4 Netherlands 1 Taiwan 4 Canada 1 India 9 Pakistan 2 Thailand 1 Chile 1 Indonesia 2 Singapore 1 Turkey 3 China 13 Italy 1 South Korea 8 UNITED KINGDOM 3
[LNG MARKET ANALYSIS ] 5 Natural Gas US natural gas prices remained stables due to mixed weather where demand was observed from both heating and air-conditioning sector, however overall sentiments remained stable as inventory build up was more than market expectation. EIA reported working gas in storage is 1,817 BCF as of Friday, 1 st June 2018, net increase of 92 BCF, with expectations were of 87 BCF increase. Supply decreased to 85.3 BCF/Day due to decrease in imports from Canada & US dry gas production number, while demand increased to 71.3 BCF/Day, with stable demand from power sector whereas 1.4 BCF/Day increased demand from residential/commercial sector. Baker Hughes reported an increase by 1 in gas rigs and total number stands at 198. Henry Hub closed at $2.90/MMBTU, with forward market also at $2.90/MMBTU level for August. North West Europe gas spot prices remained bearish through out the week due to mild weather, improved gas inventory despite outages in Norwegian gas system, which impacted supply to UK and Germany. Forward NW Europe gas prices remained stable due to bullish crude and coal prices along with lower inventory and warmer weather outlook. Outages and scheduled maintenance at Kollsnes, Nyhamma & Kristin gas processing fields kept reduced supply to UK and Germany. Gas inventory level improving but still low in NW Europe with Belgium at 19%, Germany 39%, Netherlands at 36% & UK at 29% of storage capacity. UK Spot gas price closed at $7.58/MMBTU(56.46P/Thm) on Friday, with front month at $7.38/MMBTU(54.97P/Thm). Dutch Spot price closed at $7.54/MMBTU( 21.82/MWH), whereas front month price closed at $7.48/MMBTU ( 21.55/MWH). NW Europe spot gas prices remained bullish due to warm weather, bullish crude & reduced Norwegian gas supply to France, along with forward price also stable following bullish crude & coal prices along with summer based demand picking up. France gas inventory at 36% of total capacity along with Spain hydro-based electricity generation increased to 12.31 TWH from 11.91 TWH last week, last year the number was at 8.04 TWH. French Day Ahead prices: Northern France gas prices closed at $7.57/MMBTU ( 21.88/MWH) whereas Southern France gas prices closed at $8.00/MMBTU ( 23.13/MWH). Italian gas prices closed at $8.18/MMBTU ( 23.64/MWH) and Iberian Gas Day Ahead price at $7.87/MMBTU ( 22.76/MWH). Front month Northern France closure at $7.51/MMBTU ( 21.70/MWH), while Southern France closed at $7.83/MMBTU ( 22.64/MWH), Italian gas curve prices closed at $8.25/MMBTU ( 23.85/MWH), whereas Iberian gas forward price at $8.04/MMBTU ( 23.25/MWH). Weekly European Gas and LNG Inventory Update on 8 th June 2018 One standard size Vessel of 150,000 m 3 equals to 3.42 BCF.
[LNG MARKET ANALYSIS ] 6 LNG Trade Flows 2 nd 8 th June 2018 (Developed in collaboration with Clipper Data LLC) Supply Trade Flows 93 vessels carrying approximately 5.85 million tons left export terminals. Demand Trade Flows 94 vessels carrying 5.96 million tons arrived at import terminals. W-Country- within same country delivery 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.