LNG

The United Arab Emirates’ decision to leave OPEC is ushering in a more volatile oil market, with implications for LNG pricing – particularly in Asia, where many contracts remain indexed to crude benchmarks.

Oil-indexed LNG exporters brace for a squeeze in profit margins as ICE Brent crude oil prices fell to $65 per barrel on October 5, down from $70/bbl at last week’s high, after OPEC announced a production increase on Sunday. Rystad Energy reckons ICE Brent will unlikely to hold above $60-65/bbl in 2026 unless OPEC+ adjusts its sanctions on Russia and Iran severely limits exports.

Saudi Arabian Oil Company (Saudi Aramco), the largest oil exporter, reported lower first-quarter net income while free cash flow from operating activities edged higher and advances were made on more domestic natural gas production as a Saudi strategic priority.

CERAWeek, the five-day conference taking place in Houston and attended by around 5,500 delegates including leading LNG sector executives as well as politicians and officials, had a successful start discussing the “turbulent” world and energy markets and with one of the first speakers stressing that the energy transition must be an orderly process.

Angola, the southwest African oil and gas and LNG producer, is hoping for the full support of African nations during the 2021 Angolan presidency of the Organisation of Petroleum Exporting Countries (OPEC) and for resistance to growing pressure from Western lobby groups aimed at killing the oil industry globally under the guise of saving the planet.

Oil prices moved back above $40 per barrel for the first time since March while European natural gas prices and LNG vaue indicators surged by 40 percent to recover from historic lows amid more positive signals for global economies.

The Saudi Arabian Oil Co (Saudi Aramco), the biggest crude oil production company and partly responsible for swamping the globe with oil supplies amid a demand plunge, reported a 25 percent drop in first-quarter net income to $16.7 billion from $22.21Bln in the prior-year quarter.

LNG deliveries were heading for the largest importers Japan, China and South Korea as well as the European destinations like the UK amid a two-year deal concluded by oil producers to cut output by 9.7 million barrels per day.

Chinese LNG terminals on the coast have returned to normal working and shipments will rise in the weeks ahead.

There was also a continuing flow of Australian long-term contract shipments heading for Japan and Middle East cargoes for South Korea.

Current suppliers to the Atlantic market in the days ahead include Qatar and all the main US export plants as well as Trinidad in the Caribbean.

North Sea Brent crude prices were still lacklustre at around $32 per barrel on April 13 after falling to 20-year lows of just over $20 per barrel in mid-March from $70 per barrel in January 2020.

The Organization of Petroleum Exporting Countries plus Russia held a series of video-conferences over four days during the Easter holiday to secure a deal to reduce production by almost 10 million barrels per day.

However, analysts said the lack of an oil price jump in early Asian crude markets suggested the oil output cuts were not enough in the current crisis.

OPEC was forced into action after the near month-long price war between OPEC's leading member Saudi Arabia and production rival Russia had failed to envisage the huge impact of the coronavirus on the global economy.

The OPEC production cuts by 23 oil nations are expected to be for about two years, though more may still be needed.

Four Qatargas LNG carriers are, meanwhile, heading for the UK with shipments and arrivals are scheduled for, April 15, April 18 and April 19.

The 216,000 cubic metres capacity carrier “Al Ghashamiya” is scheduled to arrive at the UK South Hook terminal in the port of Milford Haven on April 18 from Ras Laffan, the UK port authorities said.

Another Q-Flex vessel, the “Al Utouriya”, is expected to berth on April 19 at Milford Haven’s Dragon LNG terminal to discharge a Qatargas cargo.

The 210,100 cubic metres capacity carrier “Murwab” is expected at South Hook on the same day with more Ras Laffan volumes for the UK. The  Q-Flex “Al Khattiya”, will deliver to South Hook on April 15.

LNG carriers also continuing to load in the Atlantic Basin at Cheniere Energy’s Sabine Pass plant in Louisiana.

They included the 155,000 cubic metres capacity carrier “Golar Seal”, now headed for the Revithoussa terminal in Greece with arrival by around April 21.

The 155,000 cubic metres capacity vessel “British Emerald” is scheduled to discharge a shipment on April 22 at the Turkish Aliaga terminal.

The 162,000 cubic metres capacity vessel “Adam LNG” loaded a cargo at the Cove Point plant in Maryland and is scheduled to deliver on April 17 to the Sines terminal in Portugal.

The “Diamond Gas Orchid”, with 150,000 cubic metres capacity, is scheduled to arrive on April 18 at the US Cameron LNG plant near Lake Charles to lift a cargo.

Atlantic Basin LNG price indicators were still flat and under $2.50 per million British thermal units. The UK National Balancing Point natural gas price was at the equivalent of $2.10 per MMBtu.

The main Continental European price, the Dutch Title Transfer Facility (TTF), was at the equivalent of $2.35 per MMBtu.

The New York Mercantile Exchange front-month US Henry Hub futures price lower at around $1.77 per MMBtu.

There were about 98 LNG cargo liftings at global plants in the past week, amounting to 6.84 million tonnes compared with 101 cargoes in the previous week.

Total LNG cargo volumes in transit amount to more than 16MT, according to shipping data.

The 150,000 cubic metres capacity vessel “Energy Confidence” is due at Darwin in Australia's Northern Territory on April 15 after delivering to the PetroChina-operated Tangshan terminal in northeast Hebei province.

“Flex Endeavour”, with 173,400 cubic metres capacity, is scheduled to arrive on April 15 at Chevron’s Wheatstone export plant in Western Australia after delivering to Taiwan.

That’s as Japan-Korea Marker (Platts) spot values were also still low.

Shipments for southeast Asia and North Asia were quoted at $2.805 per MMBtu for May compared with $2.970 per MMBtu last week and $5.25 per MMBtu in November 2019.

The spot price for June was quoted at $2.650 per MMBtu versus $2.810 per MMBtu a week ago.

The pace of deliveries is picking up for East of Suez, particularly from the Middle East.

The vessels heading for Asia are carrying shipments from nations such as Qatar and Oman as well as US and West African plants.

In the spot shipping charter market, LNG carrier spot rates are firm.

Rates were quoted at an average of between $56,000 per day and $50,000 per day West of Suez and $48,000 per day and $42,000 per day East of Suez for vessels of between 155,000-165,000 cubic metres capacity, according to various brokers.

One-year time charters have dropped for vessels of between 155,000-160,000 cubic metres capacity and are now seen at around $52,000 per day.

Oil prices increased more than 3 percent on expectations the leading crude-producing nations would agree to cut output as the coronavirus continues to depress demand while natural gas and LNG prices remained flat, weighed down by excess supplies.

Oil prices fell for a sixth day and were on track for the biggest weekly drop in four years towards $50 per barrel as the spread of the coronavirus outside China raised concerns about slowing global economies. Other hydrocarbon markets were affected by the oil plunge, including contracted liquefied natural gas which is linked, mostly in Asia, to the crude price.

The virus, which has killed more than 2,700 people in China, has been found in another 46 countries and caused 57 deaths. 

There is concern among governments that the epidemic could turn into a pandemic and deliver a damaging blow to the global economy, 

The North Sea Brent crude price was last at around $51.00, down over 12 percent on the week, the biggest weekly fall in four years.

The US benchmark West Texas Intermediate crude price was at $45.84 per barrel.

Analysts said that the oil market was hoping for steeper supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, who have said they would take a responsible approach in the wake of the coronavirus outbreak.

OPEC is currently reducing output by about 1.2 million barrels per day to support prices and is scheduled to meet again in Vienna on March 5-6.

In the US natural gas market, outward LNG flows continue at a steady pace while spot prices fell across the nation.

A total of 19 LNG cargoes were shipped from US export plants in the past week compared with 14 the previous week.

Nine shipments left Cheniere Energy’s Sabine Pass plant in Louisiana, while four departed from Cheniere’s Corpus Christi facility in Texas. 

At the four other plants, three were shipped from the Freeport plant in Texas, two departed from Sempra Energy’s Cameron facility in Louisiana, one left from Dominion Energy’s Cove Point in Maryland and none from the newest facility, the Elba Island plant in Georgia, according to the Energy Information Administration. 

In the day-ahead natural gas market, prices fall across the Lower 48 states. 

The benchmark Henry Hub spot price fell 10 cents in the week through February 27 to $1.92 per million British thermal units.

Northeast prices recorded the biggest falls. At the Algonquin Citygate, which serves the Boston area, the price plunged 67 cents to $2.11 per MMBtu.

At the Transcontinental Pipeline Zone 6 trading point for New York City, the price dropped 43 cents to $1.90 per MMBtu.

“Temperatures were generally close to normal across most of the country and warmer than normal in the Northeast and upper Midwest,” said the EIA.

At the Chicago Citygate, the price decreased 14 cents to $1.76 per MMBtu.

The price at Pacific Gas & Electric Citygate in Northern California fell 3 cents to $2.65 per MMBtu. At SoCal Citygate in Southern California the price decreased 19 cents to $2.20 per MMBtu.

In shale-gas regions, the Tennessee Zone 4 Marcellus spot price decreased 20 cents to $1.60 per MMBtu. The price at Dominion South in southwest Pennsylvania fell 14 cents to $1.65/MMBtu.