East Asian spot LNG prices rise sharply

[jft310]

LNG Industry.com

sept 9 ,2014

 

 

East Asian spot LNG prices rise sharply

East Asian spot LNG prices rose sharply between late August and mid-September amid growing global competition for free on board (FOB) volumes and a deteriorating outlook for alternatives to gas-fired generation in Japan, according to the ICIS East Asia Index (EAX).

The October '14 EAX contract closed at US$ 13.381/million Btu on 15 September, marking a US$1.781/million Btu rise since it became the front month contract on 18 August. The November contract climbed by US$ 2.437/million Btu over the same period to US$ 14.487/million Btu.

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 opened on 18 August, demand in the East Asia appeared muted initially. For most Japanese utilities, inventories remained well-stocked as cool late August storms suppressed air-conditioning demand. South Korea's KOGAS was heard to be marketing 10 cargoes to Japanese buyers on a swap basis in return for volumes in the second half of the winter.

Surplus supply

On the supply side, Pacific basin plants continued to produce surplus cargoes with PNG LNG, Australia's North West Shelf, Indonesia's Bontang and Tangguh plants all marketing excess production for September or October delivery.

On 21 August, the highest bid for the second half of October was heard at 11.75/million Btu, while the lowest offer for the same period was recorded at US$ 12.50/million Btu.

By the end of August, the momentum began to swing towards sellers, as competition intensified for FOB volumes while the dependence of Japanese utilities on gas-fired generation increased

[sydbod]

"East Asian spot LNG prices rise sharply" and this should be continued with "but are still a long way down from where they should be", so as not to give an incorrect message.

A most interesting article (much more current also) that tries to give some insight into what may happen with LNG.
http://www.timera-energy.com/commodity-p...s-pricing/

Gateway to a new phase

From the chart it can be seen that a pronounced shift in pricing dynamics is occurring in 2014. As we set out recently, this is no ordinary fall in global gas prices. Asian spot LNG prices almost halved in H1 2014, from around 20 $/mmbtu to just above 10 $/mmbtu. European hub prices have slumped in sympathy, to a large extent driven by surplus LNG flowing back into Europe but also by the loss of 57 bcma of demand over the October 2013-April 2014 period on a year-on-year basis due to a mild winter. Yet both spot LNG and European hub prices are showing signs of a recovery into the coming winter.

Substantial volumes of new Australian and US LNG exports are looming on the horizon which threaten to tip the global gas market into a period of oversupply (as we set out here). Although new supply starts to come online later this year, volumes do not ramp up in earnest until 2016/17. That appears to leave the window open for two potential scenarios for the next phase of global pricing: ....................................... etc etc etc

[jft310]

Gulf is lower cost LNG than PNGLNG . Per Goldman today PNGLNG is some of the lowest in the world. Will the lower cost LNG sell before the higher priced LNG ?????is LNG demand going to zero ????

[sydbod]

jft, I don't disagree with your sentiment about IOC being a great investment in the longer term.
I personally agree that E/A will get developed no matter how low oil/gas prices drop to. The current price fluctuations have no bearing on the longer term viability or profitability of the E/A deposit.
By 2020 or so, the global energy outlook will be totally different to what it is now, and I have high confidence the energy prices will be higher than even the highest prices we have experienced these last few years.
That being the case, it in no way changes my short term view that ALL oil/gas companies will have a very bumpy ride over the next 2 odd years.
Anybody who is going into oil and gas securities currently had better be doing it with the longer term view in mind.

[jft310]

Syd-Thats solid advice .. I agree. And I add Margin is not your friend..!!Not directed at you Syd but others.

[Palm]

Some opinions on where oil is headed:

"U.S. oil prices fell to a 17-month low Wednesday after Saudi Arabia announced price cuts, with November futures on West Texas Intermediate crude, the U.S. benchmark, settling at $90.73 on the New York Mercantile Exchange.
Many experts expect prices to fall further still amid sluggish demand and bulging supply. But Dan Dicker, president of money manager MercBloc and author of "Oil's Endless Bid," isn't one of them.

"If you put up any chart for any currency you like against the dollar, . . . you see a ski slope. And that's really what's been affecting oil," Dicker told CNBC.

"That, to me, is a financial connection that is specious at best. . . . The dollar continues to get stronger and continues to force oil lower. But this is a mirage, and this is why: it's all about future production."

Dicker sees plenty of constraints on output. That includes sanctions against Russia, violence in Iraq, turmoil in Libya and a possible Ebola outbreak in Nigeria.

Lower-than-expected production "is going to translate into a much higher price for oil," he said. "Over the course of the next two years, I see oil going to at least $125 on its way to $140."

Others see things a bit differently.

"The Saudi price cut is a sign that they won’t be cutting back production further and may be setting up for a market share battle," John Kilduff, a partner at Again Capital hedge fund, told Bloomberg.

"One bullish inventory report isn’t going to be enough to support the market when the Saudis are taking these actions."


Read Latest Breaking News from Newsmax.com http://www.Newsmax.com/Finance/Dicker-oi...z3EzwVWQsr

[jft310]

The Saudi's budget for $100 oil. What happens with oil below $100???. Sell more at lower prices or cut the budget.??? Or both.???Somehow oil will rise above $100.

[sydbod]

jft, that " Margin is not your friend" advice is something that ALL of us should take heed of in an unstable market like what we are in at the moment. You are correct .... a Margin call can so easily wipe any person out.

Palm, that article sums up nicely what is actually happening. I have seen similar themed articles by others also. It is just so frustrating how the market in its present state has all these wild fluctuations. I like going to this site to get a feel of how the American market is going http://money.cnn.com/data/fear-and-greed/ and it is sitting at the lowest I have seen it ever. Our Australian market has had some very nasty falls and I am wondering if we are at the bottom here. The US market is in the process of having some very nasty falls .... will it keep going some more and if it does then sentiment will keep pushing the markets in the rest of the world downwards. The oil futures are going downwards and the market just does not care if it is good or bad or even if it will have any negative effect against a particular stock ... people will just keep selling in panic.
I am now sitting here and pondering if I should jump back into the market in the morning or ride it out for a few more days. Big money can be made if one gets it right ... but also significant losses can be made if one gets it wrong. Hmmmmm.... My leanings are towards a market turnaround for the end of this week.

[Palm]

Syd, that's why a few weeks ago after the US markets hit another high I sold and went 20% cash in my portfolio. Yesterday I dipped in with 1/5 of that cash and plan to dip in more should the markets continue to slide.

[sydbod]

Palm, I went 40% to cash last week, then another 40% (total 80%) on Monday. rebalanced my planning and put 40% back but into Banks this time and it looks like I may have caught the bottom for them. May put another 20% back into Oil/Gas in the morning and hold the remaining 20% until things get a bit clearer. So far this little shuffle has not only stopped me losing money but has made a small profit in this generally falling market. If the DOW falls much further then it will break through its bottom trading channel and then all bets are off. Good luck with your investing.