Strong Spot LNG Interest In India & West Asia

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Recent weakness in spot LNG prices globally has led to increased spot buying interest in India and the Middle East, prompting sellers from West Africa and the United States to divert their cargoes, says an article published on sp global website.

Summary

  • Recent weakness in global spot LNG prices has spurred increased spot buying interest in India and the Middle East, prompting sellers from West Africa and the United States to divert their cargoes.
  • The arbitrage window between the US and the JKTC region has marginally closed, but opportunities exist for Atlantic cargoes to flow into the Middle East and India due to more competitive freight route costs compared to the JKTC region.
  • US LNG exports to India in February have surged to 210,000 mt as of Feb. 21, showing a 91% increase compared to the previous month, with forecasts indicating potential surpassing of both last month’s levels and those of February 2023.
  • Traders aim to divert cargoes from Europe to the Middle East and Indian regions to capture JKM-linked prices amidst weakness in Northwest Europe prices.

Arbitrage Dynamics

As of Feb. 16, the arbitrage window between the US and the JKTC region was marginally closed, but opportunities exist for Atlantic cargoes to flow into the Middle East and India due to more competitive freight route costs compared to the JKTC region.

Increased US LNG Exports To India

US LNG exports to India in February have reached 210,000 mt as of Feb. 21, demonstrating a 91% level compared to the previous month. Forecasts suggest that exports for this month may surpass both last month’s levels and those of February 2023.

Diversion Of Cargoes

Traders aim to divert cargoes from Europe to the Middle East and Indian regions to capture JKM-linked prices amidst weakness in Northwest Europe prices.

Freight Costs And Price Spread

Freight costs from the US Gulf Coast to India around the Cape are assessed higher compared to Northwest Europe, contributing to a favorable spread between the West India Marker and the Northwest Europe Marker.

Potential For Spread Increase

The JKM/WIM spread has the potential to increase further, reaching as high as 50 cents/MMBtu if freight costs rise, incentivizing more offers to the Middle East and India.

West African Selling Interest

Traders observe favorable netbacks for selling into India from West Africa, with increased offers from Nigeria towards India.

Reasons For Diversion To India

Despite weaker flat prices, buyers in India are incentivized to purchase LNG cargoes on the spot market to meet power generation demand and refinery needs. While the arbitrage to Asia may be closed, it remains open to India.

Nigerian Exports To India

Nigerian exports of LNG to India in February are expected to surpass volumes seen in previous months, indicating a favorable flow of cargoes towards India from West Africa.

Overall Market Dynamics

West African flows have predominantly been directed eastward since January, with India being a significant destination due to better netbacks compared to other regions.

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Source: sp global