LNG

Woodside Petroleum, the company with stakes in three Western Australian liquefied natural gas plants, reported a more than 40 percent plunge in sales revenues to US$738 million from US$1.24 billion in the year-ago quarter as the average realized LNG price dropped.

US LNG exports increased to 11 shipments in the past week from six in the previous week, backed by a surge in feed-gas supplies to the main liquefaction plants that reached its highest level since May 2020, though US prices plunged on concern about the high surplus in the latest storage figures.

The Russian government has reduced its target for energy cargo transportation to China and Asian nations by the Northern Sea Route with only shipments of LNG close to meeting projected volumes and cargoes of coal and oil falling short.

US liquefied natural gas exports increased to an average 3.7 billion cubic feet per day in August, an improvement of 19 percent over the previous month of July amid rising spot and forward natural gas prices in Europe and Asia, according to the government’s Short-Term Energy Outlook.

The report noted that natural gas and LNG prices had fallen to record lows in late May and June as Covid-19 mitigation efforts reduced global consumption.

“Higher global forward prices indicate improving netbacks for buyers of US LNG in European and Asian markets for the upcoming fall and winter seasons,” said the latest report from the Energy Information Administration.

The EIA report cited forecasts of natural gas demand recovery and potential LNG supply reductions because of maintenance at some plants.

“EIA forecasts that US LNG exports will return to pre-COVID levels by November 2020 and will average more than 9 Bcf per day from December 2020 through February 2021,” added the report.

The Henry Hub natural gas spot price averaged $2.30 per million British thermal units in August, up from an average of $1.77 per MMBtu in July.

“Higher natural gas spot prices reflect rising demand for natural gas from the US electric power sector as a result of warmer-than-normal temperatures during August and rising demand for US LNG exports amid declining US natural gas production,” stated the report.

The EIA expects that rising domestic demand and demand for LNG exports heading into winter, combined with reduced production, will cause Henry Hub spot prices to rise to a monthly average of $3.40 per MMBtu in January 2021.

“Monthly average spot prices will remain higher than $3.00 per MMBtu for all of 2021, averaging $3.19 per MMBtu for the year, up from a forecast average of $2.16 per MMBtu in 2020,” it forecast.

The agency estimates that total US working natural gas in storage ended August at 3.5 trillion cubic feet, 13 percent more than the five-year (2015-2019) average.

The EIA expects inventories to reach almost 4.0 Tcf on October 31, which would be 6 percent more than the five-year average.

Total US consumption of natural gas is expected to fall in 2020 compared with the previous year.

“Consumption will average 82.7 billion cubic feet per day in 2020, down 2.7 percent from 2019,” said the report.

“The largest decline in consumption occurs in the industrial sector,” it added.

“EIA forecasts industrial consumption will average 21.9 Bcf per day in 2020, down 1.0 Bcf per day from 2019 as a result of reduced manufacturing activity,” according to the Outlook.

“The decline in total US consumption also reflects lower heating demand in early 2020, contributing to residential and commercial demand in 2020 averaging 12.9 Bcf per day (down 0.8 Bcf per day from 2019) and 8.8 Bcf per day (down 0.8 Bcf/d from 2019), respectively,” it explained.

The EIA expects US natural gas consumption will average 79.1 Bcf per day in 2021, a 4.3 percent decline from 2020.

“The expected decline is the result of rising natural gas prices that will reduce demand for natural gas in the electric power sector,” it stated.

Japan has only two weeks of LNG reserves in storage as the nation entered a state of emergency a week ago because of the coronavirus and this has coincided with cutbacks in its current limited nuclear power generation capacity.

Singapore LNG spot cargo prices moved higher again to be over the US$4.500 per million British thermal units level for fixtures to North Asia and the Dubai-Kuwait-India market as September quotes were now available.

The Singapore average index for August increased to US$4.249 per MMBtu from last week’s average of US$4.066 per MMBtu.

Singapore’s latest LNG indices released on June 20 included a price of US$4.071 per MMBtu for the second half of July before edging higher to US$4.201 per MMBtu for the first half of August.

The high volumes of supply in the market continued to impose downward pressure on prices, while crude oil was stable in the week at around $62 per barrel.

Southeast Asia cargo prices for the second half of August were at US$4.298 and were highest for the first half of September at US$4.431.

The Sling is an index series for LNG developed by the Singapore Exchange (SGX) and its subsidiary Energy Market Company (EMC).

It is a spot index for cargoes “on the waters in the vicinity of Singapore which could go into any port” and based on cargo sizes of 135,000 cubic metres capacity to 175,000 cubic metres capacity.

The North Asia price rose to an August average of US$4.560 per MMBtu compared with last week’s average of US$4.361 per MMBtu.

North Asia cargoes for the second half of July were at US$4.361 per MMBtu, before edging up for the first half of August to US$4.512 per MMBtu, then moving higher to US$4.608 for the second half of August.

The first half of September price for the North Asia market was US$4.740 MMBtu, the highest on offer.

The North Asia prices are for delivery ex-ship (DES) to all ports in Japan, Korea, Taiwan and China.

The Dubai-Kuwait-India Sling index for regional cargoes shipped to India and the Middle East averaged US$4.373 per MMBtu for August, an increase on last week’s average of US$4.205 per MMBtu.

The DKI index, based on a cargo of between 138,000 cubic metres capacity and 170,000 cubic metres, is seen in the second half of July at US$4.183 per MMBtu before increasing to US$4.320 per MMBtu for the first half of August.

The price for the second half of August rose to US$4.427 per MMBtu and the highest for the region was fixed at the first half of September price of US$4.570 per MMBtu.

The SGX LNG Index Group (Sling) is an initiative by SGX and EMC for spot LNG price discovery.

It is a benchmark based on assessments of LNG cargo value by market participants. They provide assessments based on the value of an LNG cargo at a specific location for delivery.

The Sling is based on participants submitting assessments to determine an index value.

“The participant pool consists of a broad group of market players to ensure that any Sling Assessment is as representative of actual market conditions as possible,” says the SGX, while pointing out that the participant is kept confidential at all times.

The SGX-EMC LNG prices include both lean and rich cargoes.