Column: Asian and European LNG buyers have increased their prices, but flows remain stable

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A liquefied natural gas (LNG) tanker is pulled towards a thermal power plant in Futtsu, east of Tokyo, Japan on November 13, 2017. REUTERS / Issei Kato

LAUNCESTON, Australia, Sept. 14 (Reuters) – The spot price of liquefied natural gas (LNG) in Asia is trading at record highs for this time of year amid reports that traders around the world are vying for rare cargoes.

An analysis of global super-refrigerated fuel flows, however, shows that while traders can raise prices, there is little change in where LNG is shipped.

Flows to Asia have been roughly stable in volume since March, after the winter demand peak, and the same is true for Europe.

In other words, there is little evidence that buyers from either of the major demand regions have been able to increase their share of shipments at the expense of buyers from the other.

This suggests that although prices have increased, it is not the case that excess demand in a region attracts more cargoes, but rather Asia and Europe are receiving roughly the same share of super refrigerated fuel as they do. ‘they have done so in recent months.

Asia imported 23.08 million tonnes of LNG in August, according to raw materials consultants Kpler, down slightly from 23.94 million in July, the highest since February.

Since March, Asian LNG imports have ranged from 21.2 million tonnes to nearly 24 million tonnes in July, a range of just 2.8 million tonnes.

For Europe, LNG imports amounted to 4.98 million tonnes in August, slightly higher than 4.69 million in July, according to Kpler.

European imports have remained stable at 5-6 million tonnes over the past three months, although they were higher during the winter, which is in line with the usual seasonal pattern.

Kpler expects the recent trend to continue this month, with September’s Asian imports forecast at 22.99 million tonnes and Europe’s at 4.95 million tonnes.

STABLE PERCENTAGES

Looking at each region’s percentage share shows that Asia will likely import 76.5% of the global LNG supply in September, while Europe will take 16.5%.

For the month of August, the figure was 76.3% for Asia and 16.4% for Europe. In July, it was Asia 77.2% and Europe 15.1%.

Europe tends to take a larger share in the shoulder season between peak winter and summer demand from Asia, peaking at 27.6% in 2021, while Asia took 67.9% that month.

Overall, the feeds do not suggest that buyers in one region are able to compete with those in the other.

Recent price developments may, however, suggest that buyers in Europe and Asia need to increase cash offers to secure their share of available cargo.

The price of contracts traded in New York based on the Asian benchmark Japan Korea Marker ended Monday at $ 18.82 per million British thermal units (mmBtu).

They have gained 224% since the low reached so far in 2021 of $ 5,805 per mmBtu reached on February 25.

The price of TTF natural gas contracts in Europe, converted to mmBtu, closed at $ 21.456 per mmBtu on Monday, up 290% from their closing low this year of $ 5.508 on March 3.

The TTF price typically trades at a narrow discount to the JKM contract, but has been trading at a premium to the Asian marker since September 8.

This suggests that European buyers may be more willing to pay higher prices for natural gas for the coming winter amid fears of a shortage across the continent.

Asian LNG buyers are also concerned about winter shortages, but some major importers, namely India and Pakistan, are forgoing cash shipments due to the current high cost.

Some Asian LNG importers have other options for generating electricity. Japan and China, the world’s two biggest buyers of LNG, can increase electricity production from other fuels, including coal.

This suggests that European buyers may be ready to pay more and pull cash cargoes from Asia in the coming months.

The views expressed here are those of the author, columnist for Reuters.

Editing by Tom Hogue

Our standards: Thomson Reuters Trust Principles.


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