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Page added on September 8, 2018
Global LNG prices exceed past winter peak
Asian spot liquefied natural gas (LNG) prices edged higher this week as Asian demand ahead of the winter persisted and the region’s vulnerability to unpredictable natural events was underscored by the worst power outages in years in Japan due to an earthquake.
Spot prices for October delivery in Asia rose to $11.55 per million British thermal units (mmBtu) this week, up 5 cents from the week before, market sources said.
At such levels, during a usually off-demand time, prices are not only at a four-year seasonal high, they are above winter peaks of 2014 onwards, according to Reuters data.
Few trades were seen this week but prices were well supported by crude oil, which jumped mid-week due to a hurricane approaching the US Gulf Coast, against which some spot LNG trades are done.
Demand for the super-cool gas remained constant as Asian buyers prepare for winter, eager to avoid a repeat of last year when unexpectedly low temperatures caused prices spikes.
Japan, the world’s largest LNG buyer, suffered unprecedented heatwaves over the summer, depleting storage levels which now have to be rebuilt in time for winter. One trader said its September import volumes may be higher than a year ago.
While nuclear restarts should broadly reduce Japan’s demand for LNG, a 6.7 magnitude earthquake that struck the populous northern island of Hokkaido on Thursday triggered a blackout after disabling a coal energy plant and cutting power to an already shut nuclear facility.
China is also preparing to shore up supplies, with state-controlled CNOOC opening its LNG terminals to third parties and the government considering subsidies to encourage gas storage and tax rebates for LNG imports.
South Korea’s Korea Midland Power Co Ltd (KOMIPO) is seeking an LNG cargo for delivery between Nov. 16 and Nov. 21 in a tender closing on Sept. 10, a document reviewed by Reuters showed.
Japan’s Saibu Gas is seeking one cargo every quarter for delivery over 2019 to early 2022 and may award deals in October, industry sources said. A South Korean buyer is also looking for cargoes to be delivered over 5 to 10 years, two trade sources said.
Another trader said Angola had sold a September cargo to Vitol and an October cargo most likely to Shell, while another trader said the October cargo may have gone to the Middle East and India region for below $11 mmBtu.
One trader said an earlier issue at Russia’s Sakhalin-2 terminal, which halted production at one train at the start of the month, has likely been resolved.
Russia’s Yamal LNG plant has offered cargoes for winter delivery to Asia, traders said, although it was not clear how many have been sold.
Production at Yamal has been ramping up faster than expected with another three new build arctic-classed LNG carriers about to head towards the facility, taking the total of vessels working from Yamal to 10.
In the United States, feedgas flowing into Cheniere Energy’s Sabine Pass train 4 terminal fell this week, which may indicate an outage at the 4.5 million-tonne-a-year plant.
Separately, vessels coming in and out of the Sabine Pass Channel on the Texas-Louisiana border have been restricted by the US Coast Guard due to a displaced pipeline, blocking the entry of one and the departure of another LNG tanker.
15 Comments on "Global LNG prices exceed past winter peak"
rockman on Sat, 8th Sep 2018 11:54 am
All this manufactured excitement over $11.55 Asian LNG prices. Wait until prices return to the $15+ level Asian LNG prices held for years prior to their cherry picked recent 4 year time window.
Davy on Sat, 8th Sep 2018 7:00 pm
“There Goes The Credit Impulse: Why Chinese Consumption Is On The Verge Of Collapse”
https://tinyurl.com/yavtannd
“When combing with the lagged effects from the recent slower consumer credit growth, Goldman estimates that the fading credit impulse and associated debt service costs will shave goods consumption growth by a whopping 3% in 2H 2018, resulting some time in late 2018 and early 2019 in the most negative print since the financial crisis. This, as shown in the chart below, would lead to the fastest slowdown in Chinese consumption this decade.”
“Needless to say, such a sharp contraction in consumption would lead to broad, adverse spillover effects affecting everything from China’s GDP (which would be severely impacted), to China’s reflationary impulse which has been so critical for the past decade, and which would go into reverse, sparking another global deflationary shockwave and sharply lower interest rates. What is most concerning is the timing: all of this is set to take place just as Trump’s $1.5 trillion fiscal stimulus reaches its one year anniversary (i.e. the base effect fades), and what until now has been a sugar high for the economy on a Y/Y growth basis, will result in contraction absent another round of fiscal stimulus. It would also impact global asset prices and markets, many of which are already suffering from sharp, “rolling bear market” selloffs as a result of emerging market turmoil which has so far spared the US. In short, and as always: keep an eye on China’s collapsing credit impulse for hints on what happens next going into 2019, a year in which many economists and pundits believe the US recession will finally make a repeat appearance.”
makati1 on Sat, 8th Sep 2018 7:04 pm
In other more important news: “Total debt (public + private) in America is currently at a staggering $67 trillion.” That is 360% of US GDP. Never going to be repaid.
“In 1971, the US debt-to-GDP ratio was 1.48x. (148%) That’s roughly the same multiple it had averaged over the prior century….
… the current state of the financial system is so fragile that a “convulsion” (i.e., a painful downdraft that violently reprices assets) is inevitable at this point…
https://www.peakprosperity.com/blog/114353/end-cheap-debt-fall-rise-interest-rates
Slip slidin’…
makati1 on Sat, 8th Sep 2018 7:14 pm
“Russia’s Huge Natural Gas Pipeline To China Nearly Complete”
https://oilprice.com/Latest-Energy-News/World-News/Russias-Huge-Natural-Gas-Pipeline-To-China-Nearly-Complete.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+oilpricecom+(Oil+Price.com+Daily+News+Update)
“Gazprom is dominating gas supplies to many European markets while it vies to meet the surging Chinese natural gas demand as the country is in the middle of a massive switch from coal-fired to gas-fired heating in millions of homes.”
No NG shortage there.
Davy on Sun, 9th Sep 2018 4:15 am
“The heart of the Chinese model is malinvestment. It’s about building up non-performing loans and figuring out what to do with them.”
“There is not a snowball’s chance in hell [the Chinese weakness] will not flow through to the US stock market.”
“Perhaps the biggest lesson of all is that increasingly we live in a world of debt-fueled growth that shapes the investment proposition of financial assets. That means business cycles are increasingly overwhelmed by credit cycles.”
“The Most Important Asset Class In The World (Is Not What You Think)”
https://tinyurl.com/yazwwnae
“China certainly qualifies as important based on rapid credit growth and high levels of debt…China’s credit boom is one of the largest and longest in history. Historical precedents of ‘safe’ credit booms of such magnitude and speed are few and far from comforting. The July 27, 2018 edition of Grants Interest Rate Observer assesses, “Following a decade of credit-fueled stimulus, China’s banking system is the most bloated in the world.
“China is building 20 million apartment flats a year. It needs about 6 to 8 to cover both urban migration and depreciation of existing stock. So 60% of that 25% is simply being built for speculative purposes, for investment purposes. And that’s 15% of China’s GDP of $12 trillion. Put another way, it’s about $2 trillion. That $2 trillion is 3% of global GDP. And so I can’t stress enough of just how important that number is and that activity is to global growth, to commodity demand, and a variety of different things. It [Chinese residential real estate] is the single most important asset class in the world.” Chanos is not the only one who sees building for “speculative purposes” as an impending problem.
“We’re constantly asked about how good Chinese data are. Is it all bad? It’s all bad, but it’s bad and different variations.” Chanos shared his opinion as well: “As much as the macro stuff has intrigued me … what’s so interesting about China is the lower down you get, the more micro you get, the worse it looks, in that the companies don’t seem to be profitable, the accounting is a joke.” Miller makes clear what the challenge is: “[China] is the second largest economy in the world. This is probably the most mysterious big economy in the world. And people have been so willing to work on it based on guestimates.”
China has substantial capability to manage liquidity and contagion risks. As a result, according to Miller, “We don’t spend a lot of time worrying about an acute crisis. If China falls and China does have the hard landing that a lot of people predicted, it’s not going to look like it did in the United States or in Europe. You have a state system, a state-led system in which almost all the counter-parties are either state banks or state companies. They’re not going to have the same freeze-up of credit that you did in some of these other Western economies.”
“China’s credit-saturated economy … is the primary force behind the recent gyrations in FX. The reality is that China’s currency is most intimately connected, as with any currency, to the domestic economy – debt, asset prices, real estate prices, and efficiency gains and losses rather than just trade.”
Davy on Sun, 9th Sep 2018 4:23 am
“Global Trade Hit By Rare Decline As “Supply Chains Seize Up”
https://tinyurl.com/ybym9p43
With the Trump administration about to slap tariffs of up to 25% on an additional $200 billion in Chinese goods, new data suggests that the global slowdown has already begun. Confirming our observations from two weeks ago, in which we showed that the latest freight data indicated global trade volumes are slowing… https://tinyurl.com/yavu7dgw …on Friday Bloomberg highlighted that the world trade monitor compiled by the CPB Netherlands Bureau for Economic Policy Analysis showed the rolling three-month trade volumes are not only in decline but have entered into negative territory, an ominous harbinger of economic trouble…https://tinyurl.com/y85ctt5j
“the weakness is coming not from materials but from manufactured goods, as global supply chains seize up.”
“Next Wednesday, another Beige Book is due, and it is likely to show more evidence of slowing trade as a result of escalating trade wars. While the stimulative effect of debt-fueled tax cuts and favorable fiscal policy have created a “Goldilocks economy” in the US, resulting in near record freight volumes in US ports, that temporary sugar high is most likely coming to an end, as a substantial portion of the increased volumes were related to businesses pulling forward consumption from future quarters to beat the tariffs, according to the National Retail Federation, an industry group.”
Anonymous on Mon, 10th Sep 2018 12:49 pm
It’s been $15. It’s been $5. Few years ago people thought it would be $15 until the cows came home. Then it crashed.
That’s commodities for you. The issue is that once you build an LNG plant, the capital is sunk and you run it full out. So, if the demand is not there, price will crash. Of course, the converse can be true. If demand is higher than expected, price will spike (because it takes 5 years to build an LNG plant to add more capacity).
It has been surprising how LNG has been up last year or so. Everyone expected a massive glut. There’s basically a single reason that did not happen–China demand grew much faster than expected.
Boat on Mon, 10th Sep 2018 4:03 pm
just say anything any mouse,
Up? What do you mean by up. Nat gas under $3 has been normal for some time.
Anonymous on Mon, 10th Sep 2018 6:31 pm
We are talking landed cost for LNG in Asia, not Henry Hub:
“Asian spot liquefied natural gas (LNG) prices edged higher this week as Asian demand ahead of the winter persisted and the region’s vulnerability to unpredictable natural events was underscored by the worst power outages in years in Japan due to an earthquake.
Spot prices for October delivery in Asia rose to $11.55 per million British thermal units (mmBtu) this week, up 5 cents from the week before, market sources said.”
makati1 on Mon, 10th Sep 2018 6:40 pm
Boat has no clue.
Boat on Mon, 10th Sep 2018 11:33 pm
Mak
Your 70 fake news web sites do not cover energy as demonstrated over the last 5 years.
A mouse, you should know a plethora of nat gas is coming online for global consumption over the next 2 years. Much of it from the US, no 5 year wait.
makati1 on Tue, 11th Sep 2018 12:49 am
Boat, what MAY come on line and what is actually available/affordable after the crash are two totally different things. The “world” is not the US. What happens in the Philippines or China or Russia is NOT indicative of what will happen in the US when it’s financial system goes down with the stock market casino.
If you actually have investments in oil or natural gas, you might be surprised when it all evaporates. NO, I can state that your world will end at that point and, maybe your life. Are YOU prepared?
makati1 on Tue, 11th Sep 2018 12:57 am
BTW Boat, I’m having:
roast beef (from Australia),
baked sweet potatoes (from our garden),
Asparagus(from the US,
peaches (from China)
and a chilled Heineken (from Germany)
in our air conditioned home. I am enjoying BAU for as long as it lasts. My SS, which you pay for, buys me a lot of extras as it is not needed for necessities. How about you?
Boat on Tue, 11th Sep 2018 7:13 am
Mak
I haven’t had to work for years but continue to do so. The price for food is little concern. The American way you don’t recognize. I will be eligible for SS in a few months but will wait because I don’t need it. I credit work as important for mental and physical health besides working out. Staying active keeps one alive.
Anonymouse1 on Tue, 11th Sep 2018 1:50 pm
The reason you dont ‘work’ boatietard is because you couldn’t if you wanted to. That is because you are retardED, living on welfare. Beyond simple tasks like watching TV, and posting gibberish on the interwebs, you are not exactly working class material, there, boatieretard.
So, no, you dont worry much about the cost of instant ramen noodles either. And collecting rainwater to drink in those old pool chemical pails of yours is, no doubt, keeping your cost of living down as well. Only thing you need to worry about, is the Make-A-Wish foundation folding. Then you’d be screwed would ya, reatrd?