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LNG Natural Gas Market Update – 15th – 21st July 2017

Market Analysis

Crude Oil

  • Crude oil started strong at the start of the week due to weaker USD and kept on moving north till Thursday on EIA weekly report, which depicted unexpected inventory draw down, specially a sharp draw down of gasoline inventory.
  • However crude prices went back on bearish tone after concerns pertaining to OPEC output increase during July 2017.
  • OPEC and Non OPEC members are meeting on Monday, however market is not expecting any production cut in that meeting.
  • There were still underlying concerns surrounding excess global supply with increasing production in the US, Libya and Nigeria. Libya is eyeing to reach 1 million BPD by end of July.
  • Brent price closed at $48.06/BBL, whereas WTI closed at $45.77/BBL on Friday.
  • Baker Hughes rig count reported a decline of 1 oil rig, with total standing at 764, whereas gas rig decrease by 1, with total number of rigs at 950.
  • EIA Weekly report reported a draw of 4.73 million barrels with stock at 490.6 million barrel on 14th July 2017, with market expectations were of 3.0 million barrels draw.
  • Gasoline inventories at 231.2 million barrel reported on 14th July 2017, recorded a draw of 4.4 million barrel.
  • Overall crude oil price will remain bearish due to over supplied situation and ineffectiveness of OPEC production cut.

Natural Gas

  • Henry Hub prices closed at $2.97/MMBTU, almost at the same level as last Friday, though prices remain stable during the week with $3.09/MMBTU level on Tuesday.
  • The spike in the earlier part of week is attributed to warmer than normal weather forecast for next two weeks as US has entered into hot summer season now.
  • U.S. natural gas stocks increased by 28 BCF for the week ending July 14th versus market expectation of 32 BCF increase.
  • Working gas in storage was 2,973 BCF as of Friday, July 14th. Stocks were 299 BCF less than last year at this time and 141 BCF above the five-year average. At 2,973 BCF, total working gas is within the five-year historical range.
  • NBP UK remained bearish throughout the week on stable supplies, 3 LNG cargoes expected to arrive in beginning August and pleasant weather outlook for the week, however prices rose by 6.21% to 36.5270 Pence/Therm (equivalent $4.74/MMBTU) due to short UK system.
  • Shortage in UK system is due to Kollsnes gas processing facility and Britannia gas field.
  • Dutch and French gas prices remained stable due to warm weather and Kollsnes gas processing field outage
  • However Norwegian and Russian flows are normal in the continental system keeping the prices in control.

TTF closed at €15.17/MWH (equivalent of $5.18/MMBTU) and PEG Nord France closed at €15.11/MWH ($5.16/MMBTU) on Friday.

Currency

  • Friday USD dipped to 13 month low with DXY index at 93.79 against last Friday DXY of 95.80.
  • USD weaker performance is attributable to political instability surrounding around investigation about President Trump and his associates businesses.
  • GBP/USD reversed some of its losses gaining 0.06% to $1.2982, though GBP hasn’t been able to take advantage of weaker USD performance as investors are not optimistic about Brexit negotiations.
  • Additionally UK public sector net borrowing being higher that expected in June is pulling GBP back from $1.300 level.
  • Euro kept USD under pressure, as market is expecting ECB to inching towards tapering its bond-buying, program and tightening its ultra loose monetary policy. Euro closed at $1.1656 against USD on Friday after hitting highest mark of 1.1677.

Weather

  • Summer in Europe with UK, Netherland, Portugal and Belgium remained warm, and expected to remain warm in the coming week with exception of UK, which will be around 22o
  • Spain and France remained hot, with Spain surpassing 35oC while France is in the vicinity of high 20so
  • Temperature in Argentina remained around 10-15oC, however went down to 8 degrees and expected warm in this week around 15-20 degrees.
  • Mexico remained around 23oC this week and forecasted to remain the same in the next week.
  • Middle East region summer season in full swing with Egypt around 40oC, Kuwait touched 50oC, and UAE temperature reached 45oC and will remain the same next week.
  • Indian Subcontinent in hot summer season: with temperature around 35-40oC in Pakistan and India around 35o Same weather profile for the next week.
  • Temperature sore in North East Asia, with temperature around 35-37oC in Taiwan, 30-35oC in Korea, China 28-34oC, and Japan is around 35oC for next week.
  • South East Asia already in hot weather, Thailand around 30oC, Indonesia and Malaysia ranging between 32-35oC, and will remain same next week.
  • USA Weather:  Overall weather is warmer than normal with outlook of 35oC plus for the next week.

LNG

  • Asian market closed on Friday with JKM at $5.60/MMBTU, FOB Singapore $5.3190/MMBTU, SLNG DKI at $5.4630/MMBTU for September delivery.
  • JKM future for September is trading at $5.595/MMBTU whereas October delivery is traded $6.000/MMBTU, with focus shifting on winter demand.
  • Demand in Asia seems a bit stable due to rising temperature in North East Asia, which will increase demand for air conditioners.
  • There has been demand reported from Japan, Taiwan, India and Middle East along with Mexico.
  • There are adequate LNG molecule availability in the market with Angola and Algeria offering cargoes for September delivery.
  • However market participant have the view that this demand may not support the price over a longer period due to over supply situation along with increased used of coal and fuel oil due to lower prices.
  • However weather will dictate the demand in Asian market because lower rain fall may decrease hydro power generation.
  • Indian demand opportunity based with few spot requirement as monsoon still in full swing, Indian prices closed around $5.450/MMBTU level, the increase is due to demand surge from North Asian market.
  • Demand for imported LNG in European markets is low, as weather is still manageable other than France and Spain and pipeline supply is adequate.
  • European gas hub prices remained stable with the exception of UK, where outages has resulted in price spike for NBP UK, NW Europe price heard at minor discount with NBP UK and around $0.50/MMBTU with TTF.
  • SW Europe market also stable as regular supply coming via pipeline along with contractual supply from Algeria and Norway via merchant LNG. Spanish gas prices still attractive for suppliers, as with re-gas cost (assumed) of $0.25-0.35/MMBTU, DES price is expected to be around $5.35-$5.45/MMBTU.
  • US producers netback price based upon Spain gas prices is around $4.90- 5.00/MMBTU, which translate into around $5.35-5.45/MMBTU on DES basis, however for US producers Mexico market is fetching better return as TTF plus 10-20 cents as per last deal translates into a netback is around $5.15/MMBTU.
  • ExxonMobil has decided to withdraw from exploring East Natuna NG block, Indonesia as the gas is rich in carbon dioxide, which translate into $10-15/MMBTU of development cost.
  • Egypt will be self sufficient in gas production by 2020, with gas output is expected to increase y 50% from Zohr, North Alexandria and Nooros.
  • Bangladesh is eyeing to increase it reliance on imported LNG. Mitsui has offered to setup a CCP power plant in Matarbari based upon imported LNG. This project will consume additional 100 MMSCFD (0.75 MTPA) of LNG.
  • Petronas delivered first cargo to PTT Thailand under a 12 MTPA, 15 years contract. The cargo was delivered from Petronas LNG complex in Bintulu.
  • Qatar’s plan to enhance its LNG market share, by inking a MoU, with Hoegh LNG to supply LNG molecule via FSRU based terminal. Asian markets are emerging very fast with Pakistan, India, Middle East all focusing on FSRU based LNG import terminal.
  • China National Offshore Oil Corp.’s Tianjin LNG terminal received 10 shipments amounting to 606,600 tons, worth $219 million, in the first half of 2017.
  • Poland’s eyeing on gas import mix balance by importing LNG, this has resulted in 20% increase for in the second quarter with 5.63 BCM gas sales. LNG import increased from 0.21 BCM last year to 0.48 BCM this year for second quarter volume.
  • Philippines integrated LNG import terminal has short listed six potential partner countries for G2G equity based partnership. The project includes 5 MTPA LNG import terminal along with power plant of 1000 MW. The LNG import terminal completion deadline is 2020, 4 years before Philippine’s NG field, Malampaya expected to be depleted.
  • Indian LNG import’s decline for the consecutive second month on YoY basis, as reported by Indian oil Ministry. India imported 1.32 Million tons in June 2017, which is lower by 10% on YOY basis. Lower LNG spot prices has put Indian contract buying on minimum volumes along with increase in oil import due to low oil prices.
  • Gas supplying in Argentina resuming after arrival LNG cargoes along with temperature reverting back to from 5oC, which has resulted in cutting down gas supply to industrial users.
  • Industrial energy consumers under the banner of IECA (Industrial Energy Consumers of America) is opposing the fast track bill on LNG exports on the premise that due to several LNG export project Henry Hub prices are expected to raise by 87% in 2020, which would impact the domestic economy negatively.
  • My assessment on LNG market is that focus is now shifting towards winter for European markets whereas Asian market now will be dominated by hot weather and oil prices. Long term price outlook still bearish.

LNG Merchant Activity

  • From Sunday 16th July till 21st July 2017, 41 vessels carrying 2.61 million tons (133.23 BCF) loaded from various supply centres
  • 15 vessels carrying 1.13 millions tons, have been dispatched from Ras Laffan, Qatar.
  • 3 vessels left for Indian ports while one left for Port Qasim Port, Pakistan, total volume dispatched 13.25 BCF.
  • Four vessels carrying 12.36 BCF departed from Nigerian port for European, South American and Asian locations
  • Algeria loaded one vessel carrying 1.53 BCF for France.
  • Pont Fortin, Trinidad & Tobago loaded two vessels with 5.99 BCF.
  • One vessel loaded from Brunei with load of 3.20 BCF.
  • 6 vessels left from Australian export terminals of Dampier, Darwin and Gladstone ports for Japan, China, Korea and Singapore carrying 17.89
  • One cargo left for France with 3.05 BCF from Norway.
  • Middle Eastern terminals at Das Island (UAE), Qalhat (Oman) and Ras Laffan (Qatar) loaded 17 vessels carrying 63.55 BCF for Asian and European destinations.
Departure DateVessel NameCapacity(CBM)Loading PortDischarge CountryETA Discharge PortLNG (BCF)
17-Jul-17LNG ONDO148,748Bonny, NigeriaNot Known12-Aug-17 3.07
19-Jul-17LNG BENUE142,988Bonny, NigeriaArgentina01-Aug-17 2.95
19-Jul-17LNG BAYELSA137,500Bonny, NigeriaEurope 2.84
21-Jul-17LNG ABUJA II170,000Bonny, NigeriaPortugal02-Aug-17 3.51
20-Jul-17GLOBAL ENERGY74,130Skikda, AlgeriaFrance22-Jul-17 1.53
17-Jul-17SOYO154,948Soyo, AngolaNot Known03-Aug-17 3.20
21-Jul-17SCF MITRE170,200Pampa Melchorita, PeruNot Known 3.51
21-Jul-17GALEA135,269Pampa Melchorita, PeruNot Known 2.79
20-Jul-17METHANE JANE ELIZABETH145,000Point Fortin, TrinidadChile13-Aug-17 2.99
18-Jul-17CELESTINE RIVER145,394Point Fortin, TrinidadDominican Rep.23-Jul-17 3.00
20-Jul-17HANJIN PYEONGTAEK130,366Bontang, IndonesiaNot Known26-Jul-17 2.69
17-Jul-17TRIPUTRA30,800Bontang, IndonesiaIndonesia20-Jul-17 0.64
20-Jul-17COOL EXPLORER160,000Bontang, IndonesiaAsia29-Jul-17 3.30
18-Jul-17KUMUL172,000Lese, Papua New GuineaTaiwan27-Jul-17 3.55
17-Jul-17CYGNUS PASSAGE145,400Prigorodnoye, RussiaJapan21-Jul-17 3.00
19-Jul-17ENERGY PROGRESS144,596Prigorodnoye, RussiaRussia29-Jul-17 2.98
18-Jul-17AMANI155,000Sieria Oil Terminal, BruneiKorea25-Jul-17 3.20
20-Jul-17NORTHWEST SWAN140,500Dampier, AustraliaJapan01-Aug-17 2.90
17-Jul-17ENERGY FRONTIER144,596Dampier, AustraliaJapan26-Jul-17 2.98
21-Jul-17NORTHWEST SEAEAGLE125,541Dampier, AustraliaNot Known07-Aug-17 2.59
20-Jul-17PACIFIC EURUS135,000Darwin, AustraliaJapan28-Jul-17 2.79
20-Jul-17BW PAVILION LEEARA161,880Gladstone, AustraliaChina31-Jul-17 3.34
18-Jul-17MARAN GAS TROY159,800Gladstone, AustraliaUSA27-Jul-17 3.30
17-Jul-17ARCTIC LADY147,835Melokya, NorwayFrance28-Jul-17 3.05
21-Jul-17IBRI LNG145,173Qalhat, OmanJapan 3.00
17-Jul-17SOHAR LNG135,850Qalhat, OmanUAE24-Jul-17 2.80
18-Jul-17ZEKREET178,200Ras Laffan, QatarJapan06-Aug-17 3.68
17-Jul-17AL JASSASIYA142,988Ras Laffan, QatarPakistan20-Jul-17 2.95
21-Jul-17AL GHUWAIRIYA257,984Ras Laffan, QatarNot Known 5.32
20-Jul-17FRAIHA205,950Ras Laffan, QatarNot Known 4.25
21-Jul-17RASHEEDA260,912Ras Laffan, QatarJapan10-Aug-17 5.38
17-Jul-17ASEEM154,948Ras Laffan, QatarIndia20-Jul-17 3.20
21-Jul-17RAAHI138,077Ras Laffan, QatarIndia24-Jul-17 2.85
18-Jul-17AL GATTARA216,200Ras Laffan, QatarKuwait19-Jul-17 4.46
20-Jul-17HL RAS LAFFAN185,000Ras Laffan, QatarKorea04-Aug-17 3.82
17-Jul-17AL AREESH148,786Ras Laffan, QatarMediterian25-Jul-17 3.07
21-Jul-17DUKHAN137,622Ras Laffan, QatarMediterian29-Jul-17 2.84
18-Jul-17TAITAR NO.2144,627Ras Laffan, QatarTaiwan31-Jul-17 2.98
15-Jul-17AL ORAIQ205,994Ras Laffan, QatarIndia23-Jul-17 4.25
17-Jul-17AL GHASHAMIYA211,855Ras Laffan, QatarNot Known27-Jul-17 4.37
20-Jul-17DUHAIL210,100Ras Laffan, QatarJapan08-Aug-17 4.33
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