LNG

Not a single US LNG cargo transited the Panama Canal during the first three weeks of November, according to S&P Global Commodities at Sea data, as the arbitrage window prompted most tankers to head to Europe rather than Asia.

Baseload US LNG supply to Asia – price-insensitive volumes that will head to the Pacific Basin regardless of JKM–TTF spreads – is averaging 20 percent, or 1.7 million for July. Outturn JKM prices are hovering around $12.98 per MMBtu, with analysts carefully observing developments around the Strait of Hormuz.

LNG price spreads between the Japan Korea Market (JKM) and the Dutch Title Transfer Facility (TTF) for balance of winter 2024/25 contracts have fallen, but analysts find this drop is "overdone". London-based Energy Aspects forecasts the JKM-TTF spread will rise above US shipping differentials via the Panama Canal, openig the arbitrage for US spot cargoes to head to Asia.

Spreads narrowed to $0.53/MMBtu in recent days, down from around $1.13/MMBtu in mid-September – with little fundamental change. Though freight rates have fallen, key US shipping differentials via the Panama Canal have delinked only by an average $0.18/MMBtu month-on-month.

Energy Aspects hence upholds its bullish view on bal-winter outturn JKM prices, mainly due to their bullish views on TTF winter 2024–25 prices due to rising geopolitical tensions in the Middle East and systematic buying at the TTF near-curve.

The likely end of Russian gas transits through Ukraine starting from January 2025 and Europe’s rising gas demand in an average winter may lead to supply constraints in the EU, which in turn propel up fuel prices. “Our base case outturn JKM price forecasts average $14.55/MMBtu, $0.85/MMBtu above the latest CME settlements,” they explain.

LNG buyers worldwide have launched tenders for 22 cargoes so far this month, with eight of these confirmed, against 10 cargoes tendered and confirmed last October. Of the 80 cargoes tendered in September, 53 were confirmed and 40 were bought by Asian companies.

“Japan has bought three spot cargoes via tender issued month-to-date, with two December deliveries and one January delivery,” analysts disclosed. LNG stocks held by major Japanese power utilities, a subset of aggregate LNG stocks, reached 2.02 million tons, up from a multi-month low of 1.63 Mt two weeks ago.

Indian buyers continue to issue buy tenders, which analysts believe is “likely to stock up pre-emptively before power demand increases in late October due to Diwali.” Indian LNG inventories are understood to be quite high currently.

China’s Sinopec, meanwhile, secured a December delivery via tender, after about a year of not purchasing any cargoes through tenders. Chinese LNG stocks at ten selected LNG terminals have reached 1.93 Mt, up by 0.33 Mt year-on-year.

The Panama Canal Authority has further reduced ship transits because of drought blamed on the “El Niño” weather effects to 24 vessels in November and booking slots will be cut to 22 ships in December, hitting LNG, oil and containership traffic on the Atlantic-Pacific Basin crossings and sending bidding for slots up to $2 million or more as waiting times grow to more than a week.

The Panama Canal Authority has issued further restrictions for the maximum authorized draft in locks for the Neopanamax-sized and Panamax-sized vessels, including LNG carriers, as it faces drought conditions that are challenging the modernized Canal’s capacity and draft allowances for larger ships now being constructed.

Kanfer Shipping AS, one of the leading companies for small-scale gas solutions based in Norway, has signed an accord on establishing an attractive hub for liquefied natural gas bunkering and small-scale LNG distribution in and out of the Central American nation of Panama.

Owners of large and small LNG carrier fleets are maintaining robust order books with the latest ship to be delivered being for shipowner Minerva Gas along with four other vessels for various owners that emerged from the shipyards in June.

Greek shipping line Minerva has just taken delivery of the 173,400 cubic metres capacity carrier, the “Minerva Limnos”, from South Korean shipbuilder Daewoo Shipbuilding and Marine Engineering.

The vessel left DSME's Geoje shipyard on June 30. The “Minerva Limnos” features M-type electronically controlled, Gas injection (ME-GI) propulsion, a No. 96 GW LNG containment system from GTT and a PRS-FRS re-liquefaction system.

The vessel is flying the Malta flag and is classed by European classification society DNV.

“We wish to convey to the Master, Chief Engineer and all Officers and ratings of ‘Minerva Limnos’ our warmest congratulations and wholehearted wishes for safe, smooth and prosperous voyages and calm seas,” said a statement from Athens-based Minerva.

Off Japan

The new Minerva carrier was shown in latest shipping data as being just off the coast of Japan and was expected to head for the Panama Canal before lifting its maiden cargo in the Atlantic Basin.

The vessel delivery brings Minerva's LNG fleet numbers to three carriers, following deliveries of two vessels in January and February 2021.

The shipowner has ordered two further carriers, both of 174,000 cubic metres capacity, the “Minerva Chios” to be delivered in the weeks ahead and its sister ship, the “Minerva Amorgos” to be handed over by August 2022.

The four other LNG carriers delivered from shipyards in June were for Danish owner Celsius Shipping and Greek owners Alpha Gas, Gaslog and Capital Gas.

The expectations of growing shipping demand in the LNG market is supported by the lengthening of shipping routes on the
ramp-up of export capacity from the United States and Russia.

The bulk of additional sanctioned liquefaction capacity entering the market will be in the 2021-2024 period.

At the end of 2020 as many as 150 LNG vessels were on order, which represents a quarter of the active carrier fleet, excluding floating storage and regasification units.

Of these, nearly 60 ships are scheduled for delivery in 2021, adding close to 10 million cubic metres of capacity, an 11 percent year-on-year increase.

The market entry of the remaining 15 million cubic metres of capacity on order is spread across the period between 2022 and 2025.

The Panama Canal Authority said there were fewer ongoing constraints for reserved shipping transits amid continued high demand from LNG carriers and other tankers during the peak Northern Hemisphere winter season, while the Canal was also set to serve as a hub for the shipment and storage of Covid-19 vaccines

US LNG exports are back on track after Sempra Energy shipped its first cargo from the Cameron liquefaction and export plant at Hackberry in Louisiana following a shutdown due to a power outage and other damage from a Gulf Coast hurricane at the end of August.

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.