Asia is attracting more LNG cargoes as spot prices remain low and Europe enters the injection season with a plump storage cushion.
While Europe’s liquefied natural gas imports dropped 20% to 9.05 million tons (Mt) last month, Asia’s jumped 12% to 24.3 Mt, according to Kpler data. China, Japan and South Korea led the region’s imports during March.
Strong storage inventories, lackluster demand and mild weather have held global natural gas prices down most of the year.
The European market was closed Friday and Monday for the Easter holiday, but Dutch Title Transfer Facility prices have held near $9/MMBtu amid competition with Asia for supplies.
However, more LNG is expected to land in Asia in the coming weeks given European storage capacity that is 59% full, or well above the five-year average of 42%.
What’s more, Japan-Korea Marker spot and futures prices continue to trade near $10/MMBtu, incentivizing price-sensitive buyers to wade into the spot market in recent weeks. Thailand recently awarded a spot tender for four cargoes, while the Philippines has another buy tender open for a cargo until April 15, according to Kpler
Japan took nearly 6 Mt of LNG last month, second to China which took nearly 7 Mt, and ahead of South Korea, which took nearly 4 Mt.
Japan’s LNG inventories have hit the lowest level in years. Stocks fell 5% week-over-week on March 24 to 1.52 Mt, according to the Ministry of Economy, Trade and Industry. Capacity is below the five-year average of 2.14 Mt heading into the restocking season.
Oil prices have also climbed by about 10% this year. Brent crude was again trading above $87/bbl on Monday. NGI data showed maximum Brent-linked LNG prices near $15/MMBtu. If crude keeps rising, spot LNG cargoes would be more economic. Oil-indexed LNG contracts are typically sold based on an average crude price over the previous three to six months.
In the United States, lower domestic natural gas production pushed prices higher on Monday after the prompt Henry Hub contract rallied 4.5 cents last week ahead of the Good Friday holiday. The May Henry Hub contract gained another 7.4 cents to finish at $1.837/MMBtu on Monday.
Bloomberg’s estimated Lower 48 natural gas production for Monday totaled around 96.7 Bcf/d, a roughly 4.6 Bcf/d decline day/day. Wood Mackenzie similarly estimated production at 97.3 Bcf/d, down around 3 Bcf/d from day-earlier volumes.
“Today’s losses appear to be phantom first-of-month declines and should be subsequently revised higher, although noise in daily production figures may take a few days to clear up,” said EBW Analytics Group LLC analyst Eli Rubin.
The U.S. market appears undersupplied when adjusting for weather, Tudor, Pickering, Holt & Co. (TPH) analyst Matt Portillo said in a recent note.
Among recent balance items, power generation demand has outperformed the five-year average, according to the analyst.
“With current gas prices and storage inventory, we see gas-to-coal switching remaining unlikely and have power generation averaging 35 Bcf/d (forecasted 72% share of the thermal stack) for the year, versus the five-year average around 31 Bcf/d,” Portillo said.
Meanwhile, feed gas deliveries to U.S. LNG plants continued to fall Monday. Flows were nominated at 12.5 Bcf, down from levels above 13 Bcf late last month. Freeport LNG volumes were cut by more than half to below 1 Bcf.
While Freeport restarted its third liquefaction train last month after repairing electrical issues caused by a winter storm in January, inspections and anticipated work on the other two trains at the upper Texas coast facility have cut U.S. LNG output.
In other news as the week got underway, QatarEnergy said Sunday it would charter another 19 LNG carriers as it prepares to significantly ramp up output.
The country plans to boost liquefaction capacity to 142 Mt by the end of the decade from current levels of 77 Mt. It has now signed deals to lease or build 104 LNG tankers in the largest program of its kind in history.
Elsewhere, officials in Moldova said the country would import U.S. LNG for the first time. The country’s energy ministry said 2.6 million cubic meters of U.S. gas would arrive via a Greek import terminal to help meet domestic needs on Monday and Tuesday.
The country, like others across Europe, is working to reduce its dependence on Russian natural gas imports.
