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LNG Natural Gas Market Update – 20th – 24th November 2017

Market Analysis

Crude Oil

  • Crude oil prices remained bullish throughout the week primarily on Keystone Pipe spill and anxiety around OPEC meeting next week.
  • Brent prices closed on $63.86/BBL on Friday, while WTI closed at $58.95/BBL.
  • Brent and WTI future in backwardation depicting the impact of Keystone Pipe issue, with closure on Friday for Brent at $63.88/BBL, $63.46/BBL & $63.05/BBL whereas WTI futures closed at $58.97/BBL, $58.91/BBL & $58.74/BBL for January, February & March 2018.
  • Baker Hughes rig count reported an increase by 9 to 747 with US production number on the rise.
  • Brent-WTI spread narrowed from $6.13/BBL on Monday to $4.91/BBL on Friday, however, US crude export is on the rise.
  • US crude Production, Export & Inventory data;
Million Barrels (MBbl)17-Nov-1711-Nov-1703-Nov-1727-Oct-17
Production (MBbl/D)9.6589.6459.6209.553
Exports (MBbl/D)1.5911.1290.8692.133
Crude Inventory457.1459.0457.1454.9
Gasoline Inventory210.5210.4209.5212.8

 

  • EIA Weekly report reported 1.9 million barrels draw down with stock at 457.1 million barrels on 17th November 2017, against a market expectation of 1.6 million barrels draw down.
  • Gasoline inventories at 210.5 million barrels reported on 17th November 2017, recording 0.044 million barrels build up against a market expectation a 0.737 million barrels buildup.

Natural Gas

  • Henry Hub prices had a bearish run due to warmer than normal weather outlook and closed at $2.81/MMBTU on Friday.
  • Baker Hughes reported a decrease in gas rigs by 1 and total number stands at 176.
  • EIA reported working gas in storage is 3,726 BCF as of Friday, 17th November 2017, net decrease of 46 BCF at the start of heating season, with market expectation of 52 BCF withdrawal.
  • CME Henry Hub future on Friday closed at $2.827/MMBTU for December, $3.923/MMBTU for January and $3.935/MMBTU for February, depicting weakness in demand along with regular supply.
  • North West European gas hub prices had a bullish run due to colder weather outlook along with rising crude and coal prices. UK is expecting two LNG vessels to berth in November now.

Currency

  • Dollar remained bearish majority of the week due to strength in Euro and GBP along with Fed’s President comment on inflation remain under the target of 2%. US DXY slumped to 92.76 on Friday.
  • Euro remained stable primarily on news of easing the geopolitical tension in Germany and closed at 1.19325.
  • GBP/USD also got strength on news of positive talk between UK PM and EC President on Brexit, GBP/USD closed at 1.33376 on Friday
  • AUD/USD strength throughout the week is primarily on bullish crude oil and closed at 0.76153 on Friday.
  • Japanese Yen also got the queue from Euro and GBP and remained bullish with closure at 0.00897 (111.520 USD/JPY).

Weather

  • North West Europe: Weather remained cold and the forecast is for colder for next week.
  • South West Europe: France is in cold weather, while Spain and Portugal enjoying mild to cold weather.
  • Latin America: Warm and outlook is the same.
  • Middle East: Except Egypt, rest of Middle East still hot.
  • South Asia: India and Pakistan in mixed season where demand for Natural gas is high due to heating in North and air-conditioning in South.
  • North East Asia: Cold weather with the same outlook in Korea and China, whereas Japan and Taiwan still in mild weather.
  • South East Asia: Still warm with the same outlook for next week.

European Gas and LNG quantities at Storage and LNG terminals (BCF)

One standard size Vessel of 150,000 m3 equals to 3.42 BCF.

Quantity in BCF3-Nov-1710-Nov-1717-Nov-1724-Nov-17
BelgiumGas25.6325.3625.3725.40
LNG 1.11 0.61 2.36 2.48
Total 26.74  25.97  27.73  27.88
Capacity Utilization69%67%72%72%
FranceGas 343.85 336.91 325.62 316.20
LNG 21.11 16.71 16.48 21.06
Total 364.96  353.62  342.10  337.26
Capacity Utilization75%73%70%69%
GreeceGas – – – –
LNG 1.87 1.34 2.28 1.38
Total 1.87  1.34  2.28  1.38
Capacity Utilization70%50%85%52%
ItalyGas 639.17 628.16 614.16 596.72
LNG 4.66 2.61 3.36 5.34
Total 643.83  630.77  617.52  602.06
Capacity Utilization96%94%92%90%
LithuaniaGas – – – –
LNG 2.94 2.55 2.14 1.83
Total 2.94  2.55  2.14  1.83
Capacity Utilization85%74%62%53%
NetherlandsGas 425.96 420.29 406.24 393.09
LNG 9.81 9.40 9.30 9.14
Total 435.77  429.69  415.54  402.23
Capacity Utilization96%95%91%88%
PolandGas 111.04 109.53 107.31 104.26
LNG – – – –
Total 111.04  109.53  107.31  104.26
Capacity Utilization93%91%90%87%
PortugalGas 7.18 7.22 6.65 6.48
LNG 5.02 5.35 5.14 2.13
Total 12.20  12.58  11.79  8.61
Capacity Utilization60%62%58%43%
SpainGas 85.29 85.29 84.57 83.00
LNG 40.41 43.79 31.50 32.01
Total 125.70 129.08 116.07 115.01
Capacity Utilization71%73%66%65%
UKGas 29.08 28.60 28.43 29.43
LNG 29.71 29.20 25.60 22.32
Total 58.79 57.80 54.03 51.75
Capacity Utilization87%86%80%77%
  • Supply from Norway to Germany, France, UK and Belgium is been normal as per GASCO data.
  • NBP UK Front month price jumped to 57.3470 Pence/Thm ($7.65/MMBTU) on Friday.
  • TTF Day Ahead closed at €19.99/MWH (equivalent of $6.99/MMBTU) whereas front month price closed at €20.394/MWH ($7.13/MMBTU).
  • South West Europe prices followed a bullish run on cold weather in in France along with rising crude and coal prices and lower hydro based electricity generation in Spain.
  • Spain hydro-based electricity generation deceased from 3.55 TWH to 3.24 TWH, putting pressure on gas based power generation.
  • Day Ahead PEG Nord closed at €19.90/MWH ($6.96/MMBTU) on Friday, whereas TRS France at €24.242/MWH ($8.48MMBTU), and Spain at €25.25/MWH ($8.83/MMBTU).
  • November & December PEG Nord forward prices closed downward at €20.859/MWH ($7.29/MMBTU) & €21.110/MWH ($7.38/MMBTU) on Friday with regular supply of Norwegian Gas of 1.72 BCFD and two LNG discharge.

LNG Price Assessment and Natural Gas 13th -24th November 2017

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LNG-20thto24thNovember2017-Picture5LNG-20thto24thNovember2017-Picture6

LNG Analysis

  • LNG prices remained stable due to rising crude price, bullish European Hub, production issue at Indonesia Bontang export facility and news about Russian tender closure.
  • Production issue at Bontang facility may take a month for the resolution, which means 4-6 cargoes reduction in the market.
  • Cold Weather and lack of cargo arrival at Netherlands and UK also having bullish sentiments on LNG demand.
  • There is news of spot demand from India due to lower coal inventory and smog issue in New Delhi, which Turkey is also in the market for winter procurement while Korean believes to be done with their winter procurement.
  • Russian have heard to sold two cargoes for January loading around $9.80/MMBTU level which always get a premium of 10 -15 cents.
  • Asian price closures on Friday; SLNG NEA Delivered at $9.72/MMBTU and FOB Singapore at $9.35/MMBTU.
  • Based upon FOB Singapore and Middle East, DES South Asia is calculated around $9.60/MMBTU level. DKI SLNG Index on Friday reported at $9.63/MMBTU.
  • JKM Future curve market remained stable with front month at $9.695/MMBTU along with $9.775/MMBTU & $8.650/MMBTU for February & March 2018 respectively, so basically focuses now on January deals.
  • China received 10, Japan 16, Taiwan 4 and Korea 9 vessels during first sex day of the week, depicting regular contract based supply.
  • North West European LNG prices jumped higher due to cold weather, lack of LNG cargoes plus rising coal and crude prices.
  • North West Europe closed at around $7.80/MMBTU, 15 cents premium on NBP January price.
  • South West Europe LNG also bullish on Asian prices along with lower inventory and increased electricity price due to low generation from nuclear and hydro.
  • Two reloads one each from Spain and France for Asian destinations left this week.
  • Portugal, Italy and France received total of six cargoes with 2 cargoes for France this week.
  • Based upon Iberian Peninsula gas hub price, PEG Nord and TRS along with Asian prices, South Western Europe prices are estimated in the range of $8.70/MMBTU.
  • Arbitrage window still open for cargoes from NW Europe, as netback price is estimated to be around $8.22 whereas NW Europe price for this week comes around $7.80/MMBTU, however on Brent based procurement at 14% Brent the arbitrage is still open for NEA and South Asian destinations.
  • US Gulf Coast producer price on FOB basis for December delivery for Asian destination comes around $8.37/MMBTU level, for European destinations the netback comes around $7.25/MMBTU level.
  • US Henry Hub based price is coming around $6.00/MMBTU for US based liquefaction companies, which translate into $2.36/MMBTU for Asian destination & $1.24/MMBTU for European destination.
  • Current NEA price of $9.75/MMBTU level is estimated to be 17.75% of Brent 3-0-1 basis.
  • India LNG imports stands at 11.15 Million Tons from April to October 2017.

Author’s Comments

  • Crude oil price keeping in view Keystone and OPEC meeting next week is expected to remain bullish, overall long term fundamental still bearish and any negative news from OPEC meeting can result in a bearish free fall for Crude.
  • Henry Hub based prices seem to have a bearish outlook next week, while European gas prices are on the bullish run on cold weather, which may have a bullish contribution on LNG price.
  • LNG prices seem to be stable as fundamentals regarding weather and crude price have been supporting along with production issue at Bontang, Indonesia, whereas lack of interest from China and thin trading is making buyers very continuous. Market is in wait & see mode with stable to bullish outlook for next week, with.

LNG Trade Flows (18th – 23rd November 2017)

LNG merchant data is developed in collaboration with Clipper Data LLC, due to Thanks Giving holidays, 24th November data will be shared with next week report)

SUPPLY – TRADE FLOWS

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DEMAND – TRADE FLOWS

LNG-20thto24thNovember2017-Picture8

  • 71 vessels carrying 5.06 million tons (242.74 BCF) loaded during 18th -23rd November 2017.
  • 69 vessels carrying 4.91 million tons (236.28 BCF) discharged at various demand centres during same time period.
  • Three reloads left from Korea, France, and Spain for Asian destinations.

Disclaimer: This is a personal analysis based on public information and should not be used for buying and selling of commodities. Source: SGX LNG Index Group, EIA, GIE, and Reuters.

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