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Some Asian buyers seeking additional LNG for summer - Rystad Energy's Gas and LNG Market Update

Some Asian buyers seeking additional LNG for summer - Rystad Energy's Gas and LNG Market Update

 

Here is Rystad Energy’s gas and LNG market update from senior analyst, Masanori Odaka:

"Wheatstone LNG's resumes operation ahead of east Asia’s peak summer demand season while LNG importers in the region prepare for hotter weather, prompting increased demand.

The US faces a similar situation as forecasts of hotter summer weather in the US remains a bullish factor for the gas market.

In Europe, the focus remains on potential sanctions affecting Russian LNG trans-shipments."

Asia spot liquefied natural gas (LNG) prices for August traded 2% higher week-on-week at approximately $12.8 per million British thermal units (MMBtu) on 25 June, with September 2024 financial derivatives trading around $12.9 per MMBtu on 25 June, up 2.6% on the week.

In Europe, the Title Transfer Facility (TTF) was trading around $10.9 per MMBtu on 25 June, up just 0.4 % from last week.

Asia

Asia remains the preferred destination for US free-on-board (FOB) LNG cargoes as the arbitrage remains open in June for August and September delivery.

In Western Australia, Train 1 at the Chevron-operated Wheatstone LNG export facility reached full production on 19 June, with Train 2 reaching full output on 22 June.

In Queensland, Australia Pacific LNG was offering to sell a cargo loading on 15-16 August, while Oman LNG was offering to sell a late-August cargo on a FOB basis.

Some Japanese importers have been seeking spot LNG cargoes this week.

For example, on 25 June local utility Kansai Electric was seeking a cargo for delivery in late-July or early August, with another Japanese utility considering a cargo for September delivery in the week starting 1 July.

By contrast, Kyushu Electric is offering a November delivery cargo and considering offering a January 2025 delivery cargo.

In South Korea, LNG importers seem to have paused their spot procurement for summer delivery and are instead seeking LNG for winter delivery.

Weather forecasts from the Japan Meteorological Agency are pointing towards a 70-80% probability of above-average temperatures across Japan until 28 June, except in northern and western Hokkaido where the probability is 50% average and 50% above-average, respectively.

The following week is also expected to be above average temperatures with a probability of 50-70% in all regions of Japan.

South Korea’s Meteorological Administration is forecasting a 40% probability of average or above-average temperatures until the first week of July.

In Japan, major power utilities on 26 June reported combined LNG storage levels of 2.08 Mt for 23 June.

This is down 2.8% week-on-week, similar to the 2.08 Mt seen at end-June 2023, but 3.5% higher than the five-year average from 2019-23 for the end of June.

In the downstream market, Chugoku Electric’s Mizushima gas-fired power plant unit 1 with nameplate capacity of 285 megawatts (MW) tripped on 25 June but plans to restart on 26 June.

Also in June, Chugoku Electric bought an LNG cargo for January 2025 delivery.

In South Korea, the newest nuclear power plant Shin-Hanul unit 2 (1.4 gigawatt-nameplate capacity) has been offline since 14 June without a clear restart date.

Meanwhile, a water leakage from a used fuel storage tank was detected on 22 June at the 700-MW Wolseong nuclear power plant unit 4, which began its 20th planned maintenance on 20 April, originally planned for 54 days.

Europe

LNG for delivery to Northwest Europe is trading sideways, up 0.4% on 24 June to approximately $10.8 per MMBtu at the time of writing.

Total pipeline flows from Norway into Europe were up 5.2% week-on-week to approximately 333.9 million cubic meters per day (MMcmd) on 25 June.

Visund faced an unplanned outage on 25 June, reducing capacity by 48% with an uncertain duration as of 26 June.

Dvalin has been facing process problems resulting in lower gas production from 21-26 June, with Karsto also facing annual maintenance from 10-29 June.

Meanwhile, gas pipeline flows from Russia to Europe were up 3.9% week-on-week to approximately 102.85 MMcmd as of 23 June, which is also higher than the 88.56 MMcmd seen on 23 June 2023.

Market participants are keenly monitoring the development of additional sanctions on Russia banning trans-shipments of Russian LNG to third countries via the European Union.

US

Forecasts of hotter summer weather in the US remains a bullish factor for the gas market, although front-month Henry Hub prices fell 5.3% week-on-week to $2.8 per MMBtu on 25 June.

The US National Weather Service has previously forecast that many states will have a hotter-than-normal summer, which will boost gas demand for cooling.

For now, a potential tropical storm forming in the Gulf of Mexico could affect some gas production, with the current production forecast remaining at 102 billion cubic feet (Bcf) per day.

Feedgas to LNG facilities fell 4.5% on the week to 12.321 Bcf per day on 23 June, with average feedgas supply to LNG terminals for this month at 12.86 Bcf per day as of 25 June, compared to 12.76 Bcf per day in May 2024 and 11.54 Bcf per day in June 2023.

Uncertainties over weather and US pipeline summer maintenance periods could lead to more feedgas remaining into the hub rather than gas being exported.

The US currently has ample storage levels, at approximately 3,044 Bcf, some 24% higher than the five-year average.

Read the latest issue of the OGV Energy magazine HERE

Published: 27-06-2024

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