Global LNG-Asian spot prices drop again amid low demand

May 30, 2014 - 6:22:48 pm

SINGAPORE: Asian spot liquefied natural gas (LNG) prices continued to slide this week with buyers in no rush to chase cargoes ahead of the summer amid high stocks and mild temperatures, traders said.

Spot LNG prices  for July delivery fell to around $13.10 per million British thermal units (mmBtu) this week, from $13.50 per mmBtu a week earlier. Prices have dropped more than a third from a late-winter February peak above $20 per mmBtu.

"All eyes will be on the El Niño weather phenomenon, and whether it will lead to a cooler summer and milder winter in Northeast Asia," analysts at Energy Aspects in a note.

"With this being the more frequent weather pattern during the phenomenon, (LNG) demand growth over the summer months could tend to the lower levels," they said.

Traders were watching the result of a tender by Australia's North West Shelf LNG project to sell up to two cargoes for loading in mid-July and mid-August.

Asian prices were weighed down by multi-year-low gas prices in Britain and Europe due to full storage sites there.

British day-ahead gas prices were trading at their lowest levels since November 2010 on Thursday, reflecting oversupply and reduced demand for gas.

Storage volumes in North Asia were also high, limiting spot demand, a trader said. Korea Gas Corp has its LNG tanks filled to around 80 percent of their 39 million tonnes capacity, a KOGAS spokesman said.

China's LNG intake fell 12 percent in April from a year ago to 1.37 million tonnes, as mild weather limited demand despite new import terminals beginning operations late last year.

Analysts at Energy Aspects lowered their forecast for Chinese LNG imports for this year, now seeing an increase of 3.4 million tonnes instead of 5 million tonnes.

Still, further ahead, LNG in Asia is expected to remain tight amid project delays and operating issues.

"Conditions will remain tight through 2015, as new capacity additions struggle to keep abreast of global demand increases, especially in Asia," said analysts at FG Energy in a note.

Adding to global supply constraints, Angola's LNG export project is expected to resume production only in mid-2015, a spokesman for the Chevron-led venture said. A rupture on a flare line forced a shutdown at the project last month.

The $10 billion project has struggled since starting up last summer with a series of technical faults.

Maintenance at Norway's Snoehvit LNG plant - the only one in Europe - will be extended by three days until June 12, operator Statoil said this week.

The plant, which processes around 4 billion cubic meters

 (bcm) of natural gas from an offshore gas field in the Barents Sea, has been shut for annual maintenance since May 2.

In other news, Shell this week signed a 20-year deal to supply Japan's Chubu Electric up to 12 cargoes of LNG per year, starting in October. (Reuters)