Thailand, India Buy More Cargoes, but Global Spot Demand Still …

Pockets of spot LNG demand continue emerging across Asia, particularly among price-sensitive natural gas buyers, but the market remains loose heading into summer as larger buyers across the region and in Europe remain on the sidelines.

Thailand’s PTT LNG Co. Ltd. bought nine summer cargoes for about £13/MMBtu in a tender that closed last week, according to Kpler. Indian Oil Corp.

Ltd. also bought another two cargoes at similar prices for cargoes to be delivered between May and August. Meanwhile, Vitol Inc. said last week it would deliver the Philippines first liquefied natural gas cargo this month. Natural gas storage inventories in Europe and Asia remain high following a mild winter, which is keeping a lid on spot buying.

European markets were closed in observance of the Easter holiday, but the Title Transfer Facility (TTF) slipped 16% last week, while the Japan-Korea Marker fell 7%. [Want to know how global LNG demand impacts North American fundamentals? To find out, subscribe to LNG Insight.][1]

No vessels have discharged[2] at Elengy’s Fos Cavaou, Fos Tonkin and Montoir-de-Bretagne LNG import terminals in France since labor strikes were announced March 6. Operations also have been limited at the Dunkirk facility operated by Fluxys, the nation’s only other import terminal. Three vessels were diverted from Montoir-de-Bretagne and another from Dunkirk last week as the strike action continued, according to Kpler vessel-tracking data.

Europe is still being flooded with LNG, however. Most of the cargoes being diverted from French terminals are heading to Belgium, Spain and the UK. More than 20 vessels have already been scheduled for the UK this month.

While LNG cargoes are helping to fill the void left by Russia’s cut in exports to the continent, demand hasn’t fully recovered as prices have fallen, Morgan Stanley analysts said in a note to clients last week. A rebound, they added, could take time given the structural demand destruction that occurred amid record high prices last year. TTF slipped last week after jumping sharply[3] in recent weeks amid colder weather, strikes in France and a jump in the price of other commodities like oil.

Milder weather is forecast for much of Europe in the near-term, which could further weigh on prices, but “the market still faces a challenging year ahead with no Russian pipe gas flows,” said Tullett Prebon’s Tobias Davis, head of LNG in Asia. “Therefore, it remains front and center in traders’ minds that the risk/reward continues to favor the upside.” Elsewhere in Asia as the week got underway, Jera Co. Inc. and Korea Gas Corp. announced a memorandum of understanding (MOU) to work more closely in the LNG sector.

The companies are among the largest LNG buyers in the world. Under the MOU, the companies agreed to discuss mutual collaboration, including LNG swaps, trading and ship optimization. They pointed to Russia’s war in Ukraine and how it’s upended global energy flows and supply security for entering the MOU.

Also last week, India revised its natural gas pricing guidelines to help stabilize costs in the domestic market. The government approved a floor price for domestic gas of £4/MMBtu and a ceiling price of £6.50. That compares to prices of about £8.57 when the guidelines were last issued.

The pricing mechanism covers roughly 70% of India’s domestic gas production. In the United States, Henry Hub continues to trade around £2.00/MMBtu. It was up on Monday following colder adjustments to forecasts over the weekend.

The National Oceanic and Atmospheric Administration showed colder-than-average temperatures for the West and Midwest through April 23. Schneider Electric analyst Victoria Dircksen also noted that gas rigs fell by two to 158 according to the latest weekly Baker Hughes Co. rig count[4], “indicating that the drop in gas prices continues to incentivize some producers to cut new drilling activity, creating more upside risk for prices in the long-term.” Feed gas deliveries[5] to U.S.

LNG export terminals has also been running high at near or above 14 Bcf/d. The Freeport LNG terminal continues to maintain output near capacity after ramping up all of its trains late last month following an explosion last year. Overall, however, the outlook in the U.S. remains weak.

Storage inventories are about 298 Bcf above the five-year average as spring gets in full swing.

And despite higher levels of coal-to-gas switching and stronger LNG export volumes, “the market has remained loose on a weather-adjusted basis, with more supply on the come, in our view, despite the significant decline in the 2023 curve,” said Tudor, Pickering, Holt & Co. analysts.

References

1. ^ [Want to know how global LNG demand impacts North American fundamentals?

   To find out, subscribe to LNG Insight.] (www.naturalgasintel.com)

2. ^ vessels have discharged (www.naturalgasintel.com)
3. ^ jumping sharply (www.naturalgasintel.com)
4. ^ rig count (www.naturalgasintel.com)
5. ^ Feed gas deliveries (www.naturalgasintel.com)