- The combination of a severe cold snap in Asia, supply outages and maritime congestion has propelled spot prices for LNG to previously unforeseen heights.
- The North Asian price benchmark has now risen 18-fold in less than nine months, outperforming other commodities — even Bitcoin.
- Winners in this rally include Exxon Mobil Corp., which sold a cargo last week for a record $130 million to Japan, and Total SE, which secured $126 million.
- Royal Dutch Shell Plc and Houston-based Cheniere Energy Inc., are also taking the opportunity to offload consignments that aren’t tied to long-term supply contracts.
A recent news article published in Bloomberg Quint reveals that LNG prices are rising faster than Bitcoin.
Milestone evolution
The rally is a milestone in the evolution of the global LNG market.
While the super-chilled fuel has been around for decades, seaborne volumes have risen considerably in recent years to serve burgeoning power-generation demand in Asia and countries seeking to transition from coal.
Many of the world’s largest oil and gas producers have invested tens of billions of dollars in plants that liquefy natural gas prior to export.
They’ve also sought to leverage their position as major suppliers by building up sizable trading operations in Singapore, London and elsewhere.
Trading houses such as Trafigura Group, Vitol Group and Gunvor Group Ltd. have grabbed a slice of the action as well.
A picture of spike in prices
The spike in prices is also a vindication for producers and traders following several lean years of disappointingly mild northern hemisphere winters and new supply hitting the market.
North Asian spot prices dropped almost to zero in April. On Tuesday, the benchmark rose above $30 per million British Thermal units, the highest since S&P Global Platts began its assessments in 2009.
The Total-Trafigura deal was done at $39.30. “The LNG market is the winner in this rally, and the people who believe in it — people who believed that, after two to three winters that were warm, something can happen,” said Sarah Behbehani, a veteran LNG trader and managing director at BEnergy Solutions DMCC in Dubai.
Other Beneficiaries
Other likely beneficiaries include Qatar, the biggest and cheapest LNG producer, and Australian producers Woodside Petroleum Ltd. and Oil Search Ltd., which are located even closer to Asian consumers.
Shell, the world’s biggest LNG trader, has spot volumes to play with outside its oil-linked long-term contracted cargoes, “as long as they are positioning correctly,” said Oswald Clint, an analyst at at Sanford C. Bernstein.
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Source: Bloomberg Quint
