Demand from counter-seasonal gas markets across South America and the Middle East drove premium spot LNG prices for June higher.
The ICIS June Middle East and North Africa index, MENAX, was assessed for the final time at $4.65/MMBtu on 13 May, having gained $0.70/MMBtu since becoming front month on 18 April.
Bullish sentiment across different buying regions saw the MENAX June contract rise to a high of $4.88 shortly after its premium to Northwest Europe index (NEX) peaked at $1.01/MMBtu.
Volatility on northwest European gas hubs, however, meant assessments for spot LNG to Europe also fluctuated within a $1.00/MMBtu range. Only six days prior to the widest MENAX-NEX spread, it flattened to $0.01/MMBtu.
While bids and offers for June LNG to the MENAX region as well as East Asia and South America were mostly on an upward trend, turbulence in European prices almost saw the continent swing from an economic source of LNG supply to a destination for spot LNG demand. The European price spike however was too transient to attract spot LNG but market participants could still have used the volatility for hedging purposes. Companies selling June volumes at the British NBP or Dutch TTF before the end of April before buying back in early May should have been in the money.
Despite the commissioning of several new LNG production plants around the world, which has increased global LNG supply, European import facilities continue to be used for storage and re-export.
Re-export destinations from Europe have spread from East Asia and South America to include the Middle East, and in particular, Egypt.
Supply competition can be fierce with Egypt capable of receiving volumes from as far east as Australia and as far west as the US. But the number of short positions in the market has ensured momentum this month has been with the sellers.
Contracts previously obtained for delivery to Egypt have allowed its suppliers to optimise at price levels above those seen in India and Japan.
Furthermore a late April tender from Egypt’s EGAS for three June cargoes saw premia of $0.30-0.40/MMBtu over the Japan DES price to reflect the credit risk involved in dealing with the cash-strapped state buyer.
Over the second half of April other buyers would also have been encouraged to enter the market when June prices were in the high $3.00s/MMBtu and low $4.00s/MMBtu.
Buy tenders from importers in Argentina and Poland consequently weighed on market sentiment.
An Argentine tender which coincided with the late April bull run in Europe was not awarded due to higher than expected bid levels but was relaunched in May.
Offers for the second Argentine June requirements were heard between $4.90-5.10/MMBtu, according to traders active in the tender.
Restricted supply from Atlantic and Pacific plants have helped sellers raise prices.
Technical issues at Nigeria’s fourth liquefaction train, according to buyers with offtake from the plant, compounded the announcement from the Bayelsa state government that it had sealed off feedgas to the plant on 18 April.
Trinidad too has had recurring feedgas problems while repairs at Australia’s newest plant, Gorgon LNG, have meant it likely only exports a single cargo in the second half of May.
With most LNG trading activity revolving around June optimisation of deliveries to Egypt and India, it was primarily demand from these regions that helped exacerbate supply tightness in East Asia and South America.
Source: ICIS