Calm LNG volumes contrast with spot price turmoil: Russell
(The opinions expressed here are those of the author, a columnist for Reuters.)
By Clyde Russell
LAUNCESTON, Australia, Aug 22 (Reuters) - If the global liquefied natural gas (LNG) market is viewed just in terms of volumes, the picture appears one of serene stability.
But if the market is assessed by looking at the price of spot cargoes, a sharply contrasting view emerges, namely one of stress with competition between buyers in Europe and Asia amid fears of a shortage of the super-chilled fuel during the coming northern winter.
The weekly spot price of LNG for delivery to north Asia LNG-AS rose to a record high of $57 per million British thermal units (mmBtu) in the seven days to Aug. 19.
The price has surged 154% since the low so far in 2022 of $22.40 per mmBtu, which was reached in the week to May 20, and is 267% higher than the $15.50 that prevailed at this time last year.
The price of New York-traded contracts linked to the benchmark S&P Global Commodity Insights JKM marker JKMc1 also hit a record high last week, reaching $57.60 per mmBtu on Aug. 18, before ending at $57.20 on Aug. 19.
However, LNG volumes being tracked by Refinitiv have remained steady in recent months.
Export volumes heading for Asia, the world's top-importing region, are estimated by Refinitiv at 20.59 million tonnes for August.
This is down slightly from 21.45 million in July, but up from June's 19.53 million, according to Refinitiv's vessel-tracking and port data.
Asia's average imports for the first eight months of 2022 are 21.34 million tonnes per month, according to Refinitiv data.
However, this is down from an average of 23.03 million tonnes per month for the first eight months of 2021.
The loss of volumes to Asia is largely because of Europe's renewed appetite for LNG in the wake of lower Russian pipeline supplies, and the threat of further loss of these volumes amid the ongoing fallout from Russia's Feb. 24 invasion of Ukraine.
Europe's LNG imports have been steady in recent months, coming in at an expected 9.17 million tonnes in August, 9.55 million in July and 9.73 million in June, according to Refinitiv.
These volumes are down from what was being imported earlier this year, with January to May seeing deliveries above 11 million tonnes a month, apart from February when Europe's arrivals were 10.39 million tonnes.
For the first eight months of 2022, Europe's LNG imports have averaged 10.62 million tonnes per month, up 62.7% from the 6.53 million over the same period in 2021.
SCRAMBLE FOR CARGOES
The overall picture that emerges is one of increasing competition for roughly the same global volume of LNG, with Europe bidding up the price in order to secure a greater share of available cargoes.
The questions for the market is whether supply can increase by enough to ease price pressures, and if not, how high can prices rise as buyers compete for winter supplies?
There are some positive signs on the supply side, with Shell's SHEL.L Prelude floating LNG vessel off Western Australia likely to resume shipments in coming weeks, while Sempra Energy SRE.N also expects to start production at its Cameron LNG facility this quarter.
But these supply gains are modest compared to the likely demand, especially if there are further disruptions to Russian pipeline supplies of natural gas to Europe.
The energy situation in parts of the northern hemisphere has also been made worse by ongoing drought, which has cut hydropower generation in China and Norway among other countries, and the lack of water is also an issue for some nuclear and coal-fired power plants, given the need for cooling.
What seems likely is that countries that can afford sky-high prices for LNG will continue to buy and bid prices higher, but those that can't will withdraw from the market and instead suffer energy shortages and power curbs.
India is a case in point, with its August LNG imports estimated by Refinitiv at 1.33 million tonnes, which would be the lowest since June 2017, and some 36% below the 2.08 million tonnes from August last year.
Neighbouring Pakistan is expected to import 337,500 tonnes of LNG in August, the weakest month since April 2017 and about half the volume it took in August last year.
However, Japan, which is on track to reclaim its spot this year as the world's biggest LNG buyer from China, is seeing largely steady imports, with August arrivals pegged at 6.05 million tonnes, down slightly from 6.22 million in the same month in 2021.
GRAPHIC-LNG imports by Asia, Europe vs JKM price: Link
Editing by Christian Schmollinger