Cargoes of liquefied natural gas are trading in Asia below $4 per million British thermal units for the first time in several years, as new supply floods the global pool and as demand from North Asia remains weak, reports Reuters.
The last time a cargo traded below $4 was likely about three to four years ago, two of the six industry sources said on Thursday.
Cargo for deliveries at $3.69 per mmBtu
Indian Oil Corp bought a cargo for delivery in the second half of August from commodity trader Trafigura at $3.69 per million British thermal units (mmBtu) through a tender, the sources said.
Separately, China National Offshore Oil Corp (CNOOC) bought a cargo for delivery in early September from Vitol at $3.90 per mmBtu, the sources added.
Spot LNG prices
- Spot LNG prices in Asia were at $10 per mmBtu at the same time last year, after reaching a four-year high in June 2018, Eikon data showed.
- They have been steadily dropping after a mild winter reduced demand last year and by new supply this year.
- European spot LNG prices have been trading at a discount to the benchmark Dutch month-ahead gas price at levels below $3.40 per mmBtu this week.
Record low price Indian cargo
The Japan-Korea-Marker, a benchmark price assessed by S&P Global Platts that is fast gaining traction among traders, fell to a record low of $3.65 per mmBtu on May 26, 2009, a Platts spokesman said. Platts started the assessment in January of that year.
“The market’s pretty weak at the moment and the Indian cargo is probably a record low (price),” said one of the sources, a Singapore-based LNG trader. “Prices are weak in Europe and in the United States as well.”
Oversupply of LNG
Edmund Siau, an LNG analyst with FGE said that we are in an oversupplied LNG market, and demand growth from Asia has not been able to keep up with global supply growth.
The next price support level would come from turning down of U.S. LNG supply, however winter prices would need to fall significantly for this to happen.
Prices turn around for the winter
IOC also bought a cargo for September delivery at $4.20 per mmBtu from Vitol, while PetroChina bought a cargo for September delivery from Vitol at $4.05 per mmBtu during the S&P Global Platts trading period on Wednesday, the sources added.
While the prices could quickly turn around for the winter amid colder temperatures, high gas inventories in Europe could weigh on prices, Siau said.
U.S. LNG trains
Siau added that more supply to arrive on the market with new U.S. LNG trains that are starting and ramping up.
Production from Cameron, Freeport, Corpus Christi, and Elba Island are all seen ramping up through year end.
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Source: Reuters
