Asian LNG Languishes Behind Stronger Europe , by Marex

No. 4 LNG

By MarEx

Asian spot liquefied natural gas prices remained at a discount to European prices, with limited fresh business being done in the world’s top consuming region, traders said on Friday.

The price of spot LNG for April delivery held steady at $6.70 per million British thermal units (mmBtu) on Friday in line with the previous week, while Europe’s benchmark UK gas hub prices maintained a premium.

“There remains a small premium into Europe, we see increasing interest to at least leave whatever is produced in the Atlantic Basin, in the Atlantic Basin,” said a trader.

Atlantic Basin producers include Trinidad and Tobago, Nigeria and Algeria.

The premium has already triggered a surge of LNG cargoes from the world’s biggest exporter Qatar, equidistant between Europe and Asia, with seven new LNG tankers embarked for Belgian, British and Dutch ports this week alone.

Europe is attracting twice as many LNG tankers as last year and more are expected.

Prior to this month, European gas had not traded at a premium since the Fukushima nuclear crisis caused a spike in Asian demand in 2011.

Traders said that Lunar New Year holidays also limited activity in Asia this week.

One brighter spot was Brazil, although volumes needed were not expected to be significant.

“Brazil has some demand, but we’re talking maybe a few extra cargoes,” said a ship broker.

“They’re spoilt for choice,” the broker added, referring to ample supply available on the spot market.

“It looks like Europe is the only market with some depth where it’s possible to place some (volumes of) cargoes.”

More details on the results of Egypt’s recent tender were announced this week, with trading house Vitol to supply nine LNG cargoes for two years starting June 2015, while talks with BP for a further 21 LNG cargoes are close to being finalized.

Copyright Reuters 2015.