LAUNCESTON, Australia (Reuters) – The rise in record highs for the price of liquefied natural gas (LNG) is largely due to bad cold weather over much of northern Asia, but it appears to be inconsistency with fuel buyers is a bigger factor.
The estimate set weekly spot prices at $ 21.45 per million British thermal units (mmBtu) on January 8, down the pre-record high of $ 20.50 from February 2014. Prices have risen a staggering 1,060% since hitting them a low of $ 1.85 in May. .
There are also media reports of at least one transaction in the past week priced at around $ 33 to $ 35 per mmBtu, which shows how urgent it is for some buyers to get supply of fully cooled fuel.
While there is no doubt that the winter has been harsher than usual in northern Asia, with heavy snow in Japan and temperatures falling to their lowest level since 1966 in Beijing, the weather alone cannot explain such a large price spike.
At the end of November, when the spot price was just $ 6.40 per mmBtu, the message from importers in the top three buyers, Japan, China and South Korea, was that they were comfortable with it. the amounts of LNG they received for the coming winter.
The idea was also expressed that although the winter would be colder than expected, there were plenty of loads available, as the remaining LNG production capacity went up.
That comfort among buyers was completely misunderstood, and the spot price started to rise from the week of November 20 onwards because buyers had to reassess the level of demand to which they were headed. expectations, natural gas deposits and the availability of commodity spots.
Certainly some of the production rates in Australia’s major exports and elsewhere have been straining the supply of spot loads, but this should not have been enough for such a large unparalleled collection. motivation.
The LNG flows estimated by Refinitiv showed that delivery volumes rose in December, but not significantly compared to the same month in previous years.
A total of 20.1 million tonnes of LNG was released at ports in Japan, China and South Korea in December, according to Refinitiv vessel tracking data.
This was up 9.6% on the 18.34 million tonnes in December 2019, and an increase of 5.7% on December 2018.
China was behind much of the increase in numbers, importing 8.14 million tonnes in December, up 14% on the 7.14 million in December 2019 and jumping 27% from the 6.42 million tonnes in December 2018.
Japan, which has the status of being the world’s leading LNG buyer more and more challenged from China, imported 7.73 million tons in December, up 16.6% from 6.63 million in December 2019, but stable from 7.72 million tons in December 2018 .
SOLAR RAMPS UP
On the supply side, there are signs that the recent tightening of the rally is starting to ease, with the United States, the main swing supplier to the market, delivering more loads since a few weeks.
U.S. LNG exports rose to 6.18 million tons in December, the highest monthly total estimated by Refinitiv, and up from 5.77 million in November.
With the sailing period of up to six weeks from the U.S. Gulf coast to northern Asia, many of the exports from late November and December only arrive in the current month, and may pour in early February.
Exports from Australia have also risen in recent months, although 6.51 million tonnes in December was lower than 6.89 million in November and 6.77 million in October.
However, those three months represent surpassing volumes around the middle of the year, with both June and July coming in at less than 6 million tonnes.
Qatar, which lost its crown as the world’s leading exporter to Australia, saw relatively strong exports in December, with shipments of 6.48 million tonnes, up from 5.86 million in November and 6.42 million in October.
LNG emissions in recent weeks are not matched by the sharp rise in prices, as it appears that LNG is being extracted, extracted and exported. delivered.
Most likely, some customers are mistaken in the availability of product spots, and when they were hit by high demand they were unable to get additional supply, and therefore claim the prices are high for the few loads still available.
If this happens, prices could reverse as soon as the current period of strong demand begins to ease.
Edited by Christian Schmollinger