Soaring oil prices and tight spot markets set to ease
April 2018
The period of 2017 to 2019 will be characterised by upwardly trending gas prices, which could see Henry Hub based pricing rising in the next 18 months, from the number of new liquefaction trains that will be coming online. The Japan, China price could be at the higher end of this scale should there be a tightening of feed gas supplies into Australian LNG plants.

AME expects that around 52Mtpa of LNG contracts will be coming into effect in 2018, at new facilities, and also renewal contracts. April-June trading should show an easing of spot volatility, as new capacity begins to feed markets. Along with this, a seasonal easing will mean lower price expectations over the June quarter. Price markers are bearish and in line with seasonal cycles, but will reflect y-o-y (year on year prices) growth, as demand for LNG expands into new areas.

In March, prices were driven by linked oil prices higher than US$66/bbl. LNG prices in Asia were affected by a cold snap that lifted prices, and matched the sustained levels of European markets, also affected by a cold snap. LNG prices in -Western Europe were in a tight range around US$8Mbtu, but were at a premium against the UK NBP price that ranged US$7-7.7/Mbtu. In the UK, where gas supplies fell short of demand, all three LNG terminals imported cargoes at capacity.

Japanese consumption maintained its pace, receiving up to 40 weekly cargoes, China 20 and South Korea 14. A new terminal opened at Soma, in Japan, where the national spot averaged US$9.8/Mbtu. Spain continued its thirst for gas, and China focussed on importing against contracted supply. Indian buyers were reluctant to accept the high prices. This included GAIL who is offering gas swaps against its Cove Point, US commitments as it eyes cheaper freight opportunities from Qatar or Australia.

In March, Peru LNG was again on-stream as it recovered from a February shutdown. Sabine Pass continued delivering up to 6 weekly cargoes. PNG LNG entered a two month shutdown after its Hides Gas Plant that feed the facility was damaged by an earthquake. Longer term, the 20Mtpa Alaska LNG made progress, selecting the Bank of China and Goldman Sachs for capital raising assistance, Petronas began deliveries to Hokuriku Electric, and Qatar appointed Chiyoda for its gas field expansion FEED.