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Market Analysis

Crude Oil

• Crude oil prices have a bullish run and crossed $60/BBL mark on Friday, primarily on an enhanced expectation of oil production extension by OPEC along with US refineries back in full swing and Iraq conflict.
• As hinted by Saudi Energy Ministry that OPEC has shifted in policy and target is to bring back OECD stock level below five years average.
• US Gulf Coast refinery consumed 8.8 million barrels a day this week, a higher number from last five year average.
• Armed conflict between Iraq and Kurdistan has further reduced the flow and 350,000 BPD production is offline and adding into bullish sentiments.
• All above factors are aggregating towards a stable bullish run for crude, in the long run, however, the market is now closely watching $60 level mark as in the past Crude came back after touching, we expect profit taking at this level as above mentioned factors are still expected to be short-lived.
• October 20^th, 2017 EIA report depicted an increase in US crude export oil to 1.924 million barrel per day from last week 1.79 million barrels a day.
• Brent prices closed on $60.44/BBL on Friday, while WTI closed at $53.90/BBL at CME. Brent-WTI spread on Friday at $6.54/BBL.
• Brent future depicting strength for December closed at $60.58/BBL, $60.32/BBL & $60.00/BBL for December, January & February 2018 respectively, still uncertainty on $60 mark.
• CME WTI curve market closed on Friday at $54.19/BBL for December, $54.34/BBL for January and $54.45/BBL for February.
• EIA Weekly report reported a build up of 0.9 million barrels with stock at 457.3 million barrel on 20^th October 2017; against a market expectation of 2.6 million barrels drawdown.
• Gasoline inventories at 216.9 million barrels reported on 20^th October 2017, recording 5.4 million barrels draw against a market expectation a negligible build-up.
• Baker Hughes rig count reported an increase by 1 in oilrigs, with total standing at 737.
• Though Brent has crossed $60/BBL level mark, however, the fundamentals still are vulnerable and market still not very confident on $60 price level.

NATURAL GAS

• Henry Hub prices had a bearish run throughout the week primarily on mild weather outlook, Henry Hub closed at $2.75/MMBTU on Friday.
• Another bearish factor for Henry Hub was an increase in supply by 1% from last week along with a decrease in demand by 1%, reported by EIA.
• Baker Hughes reported a decrease in natural gas rigs by 7 and total number stands at 172.
• Working gas in storage was 3,710 BCF as of Friday, October 20^th 2017, an increase of 64 BCF from the previous week, in-line with the expectation of 65 BCF.
• CME Henry Hub future on Friday closed at $2.96/MMBTU for December, $3.097/MMBTU for January and $3.10/MMBTU for February, depicting weakness in the market.
• European hub prices remained mixed as pipeline gas supply from Norway and Russia is adequate. Prices taking direction from oil and coal prices along with weather spikes.
• NBP UK market remained stable as the weather outlook remained cold along with adequate supply from Norway, Russia and LNG send out due to the arrival of LNG vessel.
• NBP UK Day Ahead price closed at 45.99 Pence/Thm ($6.04/MMBTU) on Friday, increased by 3.74% from last Friday.
• NBP UK curve market remained range bound majority of the week before closing down at 47.94 Pence/Thm ($6.29/MMBTU) due to falling Coal and power prices. For December the closure was on 50.50 Pence/Thm ($6.63/MMBTU) on Friday.
• Continental gas prices remained bullish due to crude prices along with lesser electricity production from renewables and cold weather outlook. TTF Day Ahead closed at €17.13/MWH (equivalent of $5.78/MMBTU),
• Curve market remained mixed due to declining coal prices along with lower carbon prices throughout the week. TTF November at €17.66/MWH ($6.01/MMBTU) and December at €18.07/MWH ($6.15/MMBTU) on Friday.
• South West Europe prices remained bullish due to nuclear outage extension in France and lower hydro level for power generation in Spain.
• PEG Nord France closed at €17.44/MWH ($5.93/MMBTU) on Friday, whereas TRS France at €19.03/MWH ($6.47/MMBTU) and Spain at €22.00/MWH ($7.49/MMBTU).
• Spain and Portugal’s weather is easing and bearish factor for demand and prices, the price remained stable in the Iberian gas market and closed at €20.70/MWH ($7.15/MMBTU).
• November & December PEG Nord forward prices closed downward at €18.23/MWH ($6.20/MMBTU) & €18.77/MWH ($6.39/MMBTU) on Friday primarily on weather outlook.

Currency

• Dollar remained bullish and strong throughout the week on US strong GDP data along with bad performance on Euro.
• S. dollar index, measured against a trade-weighted basket of six major currencies closed at 94.81 on Friday.
• Euro went down as European Central Bank decided to slow down it monthly bond procurement plan, however, ECB President comment on tapering is open-ended further pulled the Euro down. Euro closed at 1.160949 on Friday.
• GBP/USD remained stable and range bound and spiked to 1.3259 on Wednesday on strong UK growth data and market expectation that BOE will raise the interest rate next week.
• AUD/USD closed at 0.76767 on Friday, remained bearish throughout the week after weaker CPI data.
• Japanese Yen also remained bearish against USD and closed at 0.00880 (113.680 USD/JPY).
• The People’s Bank of China set the Yuan parity rate against the dollar at 6.6288 on Friday.

Weather

• North West Europe; Winter is almost there, mild this week and expected to be a bit colder next week.
• South West Europe: Spain and Portugal still hot, however, expected to be mild next week. France also experienced mild weather and forecast is same.
• Latin America: Brazil is hot and expected to be hot next week, while Argentina this week remained mild with the same outlook for next week.
• Middle East weather easing a bit but still in hot weather season.
• South Asia: India and Pakistan mixed weather with mild weather.
• North East Asia: Taiwan still hot and expected to remain hot next week, Japan is mild and expected the same next week, while Korea and China are mild to cold and expected to be in the same range next week.
• South East Asia: Thailand, Indonesia and Malaysia still in hot and expected to remain same next week.
• North America: Mexico remained hot to mild and expected to remain same next week.
• USA Weather:  US weather remained hot to mild with the exception of South East, North East and Pacific Northwest, which is expected to be cold.

LNG

• Asian LNG prices remained mixed due as the market was waiting for tender results from India, Pakistan and Russia, along with bearish factors like lack of interest for December cargoes.
• Japan, Korea and Taiwanese customers are still procuring on Brent based price, which still is around $7.60/MMBTU level.
• Spot deals for January were reported at high $8 and low $9 for a India buyer, whereas Pakistan bought cargoes for January delivery at 16.15% -16.89% of Brent, which is line with current spot prices and historical bullish run of LNG prices.
• Asian price closures on Friday were driven primarily on news of Russian tender; SLNG NEA Delivered at $8.85/MMBTU and FOB Singapore at $8.548/MMBTU.
• Based upon FOB Singapore and Middle East, DES South Asia is calculated around $8.70/MMBTU level. DKI SLNG Index on Friday reported at $8.71MMBTU.
• On the Supply side, there is adequate supply from Australia, Qatar and USA, along with spot tender from Angola Wheatstone production.
• JKM Future curve market jumped to $8.85/MMBTU, $9.10/MMBTU & $9.15/MMBTU for December 2017, January & February 2018 respectively, still uncertainty in LNG prices.
• The bearish tone is attributed to mild weather in Europe, adequate supply situation, an absence of Chinese buyer and focus on contract based LNG procurement.
• North West Europe weather is getting cold and it’s a bullish factor along with rising coal prices. South West Europe LNG prices were high due to French Nuclear plant outage extension news and Spain lower electricity generation due to hydro level.
• There is demand heard from India and Turkey for January cargoes.
• The arbitrage window still open for reloads from European ports as netback based upon Chinese/Taiwanese destination still better than European prices, $7.65/MMBTU FOB is the netback price for South West European ports.
• North Western European hub curve prices remained range bound between $6.95-$7.05/MMBTU level due to supply balance.
• Keeping in view Asian spot prices, North West Europe prices are driven on the basis of NBP UK premium and estimated at $6.95/MMBTU, 30 cents premium on NBP UK December price.
• Based upon Iberian Peninsula gas hub price, South Western Europe prices are estimated in the range of $7.50-$7.60/MMBTU.
• US Gulf Coast producer price on FOB basis for December delivery for Asian destination comes around $7.40/MMBTU level as currently Asian prices are dictating global LNG prices, for European destinations the netback comes around $6.10/MMBTU level.

Author’s Comments

• LNG prices currently bullish run is primarily due to recent closures along with historical trend of winter prices and bullish Brent prices. Recent deal reported from Pakistan and assuming $57/BBL price level will convert into $9.20-$9.60/MMBTU level. However LNG fundamentals still are weak as supply is adequate and Chinese are still in wait and see mode along, Big buyers are still buying on formula based pricing, so December price outlook still look bearish as demand is low. Brent price hold the key as any further bullish trend of Brent can bring contractual buyers back in Spot market.

 

LNG Merchant Activity

LNG merchant data is developed in collaboration with Clipper Data LLC.

LNG SUPPLY CENTRES

• 88 vessels carrying 5.93 6.02 million tons (285.02 289.24 BCF) loaded from various supply centres, during the week from 21^st -27^th October 2017, slightly lower than last week.
• 19 Vessels left from Qatar carrying 76.64 BCF for India, Korea, Japan, China, U.K. and Latin America.
• Seven vessels carrying 23.92 BCF departed from Nigerian port, for France, Spain and India.
• Algeria loaded seven vessels carrying 17.92 BCF for Turkey, France, Spain, Greece and UK.
• Pont Fortin, Trinidad & Tobago loaded four vessels with 11.97 BCF Brazil and other destinations.
• 13 vessels loaded from Brunei, Malaysia and Indonesia with a load of 37.22 BCF for China, Japan, Korea, Thailand and Taiwan.
• Sixteen vessels left from Australian export terminals of Dampier, Darwin and Gladstone ports for Japan, Taiwan, China and Korea carrying 53.27 BCF.
• Four cargoes left from Norway with three small cargoes and one with 3.42 BCF destined for Latin America.
• Two reloads, one each from Fos Sur Mer, France and Rotterdam, Netherlands from Japan and Egypt.
• Four vessels left from Sakhalin, Russia for Japan, Korea & Taiwan carrying 10.24 BCF.
• 17.85 BCF loaded into 5 vessels from Cheniere Sabine Pass for Spain, Korea, Thailand and China.

LNG DEMAND CENTRES

• 89 vessels carrying 5.53 million tons (265.65 BCF) discharged at various ports the week from 21^st -27^th October 2017.
• Japan being the biggest importer with 67.57 BCF and 21 vessels discharged, 10.47 BCF more than last week.
• North East Asia block comprising of Japan, Korea, China and Taiwan discharged 151.34 BCF (47 vessels) approximately 56.97% of total discharged global volume.
• Argentina receives 1.44 BCF (1 vessel) from Point Fortin, Trinidad & Tobago.
• Mexico received 9.62 BCF (3vessels) one each from US, Equatorial Guinea and Nigeria.
• India receives 5 vessels with 16.49 BCF from Egypt, Qatar and Angola.
• Pakistan received one vessel carrying from Qatar.
• France receives 3 vessels with 8.50 BCF, One each from Algeria, Norway and Qatar.
• UK received 15.58 BCF, two from Qatar and one vessel from Algeria.
• Spain received 6 cargoes with 11.71 BCF, three from Peru, Algeria and Peru.
• Italy received 2 vessels carrying 6.76 BCF from Qatar.
• Five vessels arrived at China, Korea, Mexico and Brazil carrying 19.09 BCF from Sabine Pass this week.