ATLANTIC LNG: Key market indicators for Feb 12-16

Atlantic LNG markets continued to see downward pressure amid high stocks and milder weather, though there were some bullish signs in the short term.

In Asia, Platts, part of S&P Global Commodity Insights, assessed the March JKM at $9.163/MMBtu and the JKM April derivatives at $9.150/MMBtu Feb. 9. The west India market for March was assessed at $8.963/MMBtu.

NWE, Med

Milder temperatures coupled with high inventories and a strong import trend have kept European and West Mediterranean prices on a downward spiral. While prices in the East Mediterranean have succumbed to the downward pressure, with less volumes from Qatar, there was slight price support as buyers in the region priced up in order to attract additional volumes from elsewhere.

Platts assessed the DES Northwest Europe Marker for March at $7.888/MMBtu Feb. 9, down 23.10 cents/MMBtu on the day and 72.2 cents/MMBtu lower on the week.

"We see storage withdrawals support fundamentals for the balance of winter 2023–24. Weak weather-adjusted residential consumption, poor economic fundamentals and improving nonthermal generation are suppressing demand, while the biggest supply sources of Norwegian pipeline and LNG are joined by Ukrainian storage withdrawals to keep EU storage capacity very full for the time of year," Lucien Mulberg, analyst, and James Taverner, senior director at S&P Global said.

Platts assessed the Mediterranean market at $7.788/MMBtu, down by 23.1 cents/MMBtu on the day and 88.2 cents/MMBtu week on week. The East Mediterranean market was assessed at $8.088/MMBtu, also down 23.1 cents/MMBtu on the day but lower by 67.2 cents on the week. That puts Med prices at a 10 cents/MMBtu discount to Northwest Europe and East Mediterranean at a 20 cents/MMBtu premium to Northwest Europe.

Stocks still remain healthy, above the five-year average, with traders adding that "there is a lot of selling interest because of the supply glut.... Arbitrage to the East is closed, indicating more people offering Atlantic." Gas storage levels in the EU fell 0.20 percentage point on the day and 3.15% on the week to 67.02% full as of Feb. 10, according to Aggregated Gas Storage Inventory data. Meanwhile, EU LNG inventories fell by 552,000 cu m on the week to be at 4.144 million cu m as of Feb. 10.

Gulf Coast marker

Platts assessed the FOB Gulf Coast Marker at $7.14/MMBtu Feb. 9, down 35 cents/MMBtu on the day and down by 72 cents/MMBtu on the week.

In the US, the return of milder temperatures has quelled demand from the heating sector. Although uncertainty over the tensions in the Red Sea and the Freeport LNG outage supported prices momentarily in Europe and Asia, sources expect strong supply out of the US, as well as relatively weak residential and commercial demand to keep price hikes in check. For now, the market still sees supply and storage levels healthy in the US, with limited expectations for domestic consumption to increase unless a cold spell hits.

US LNG exports in February stood at 3.19 million mt as of Feb. 12, according to S&P Global data. This was about 38% of the previous month's volume. Of the current total, 36% was headed to Europe while 12% was headed to Asia, the rest was yet to be nominated.

Platts assessed DES Brazil for deliveries 15-45 days forward at $8.088/MMBtu, or at a 20 cents/MMBtu premium to Northwest Europe.

LNG swaps

Despite the bearish fundamentals, slight support was being seen in March with sources seeing "March getting tighter than April, it is getting more backwardated." Traders suggested that the Northwest European forward curve was flat between now and the end of summer, showcasing the relatively weak outlook for the coming months.

Platts assessed March DES Northwest Europe derivative at $8/MMBtu, April at $7.949/MMBtu, May at $7.953/MMBtu and June at $8.003/MMBtu.

The market was also eyeing a narrowing structure between summer and winter, with bullish signals in summer as well as looming uncertainty for this winter leading to a narrowing contango between the seasons. Platts assessed the NWE forward curve for summer 2024 at $8.055/MMBtu and winter 2024 and $9.664/MMBtu on Feb. 9, this compared to the previous day's value for summer and winter 2024 at $8.254/MMBtu and $9.873/MMBtu, respectively.

Elsewhere, in the LNG bunker market, although the Red Sea tensions are causing ships to divert and take the longer route around the Cape of Good Hope, sources are not seeing this increased demand for LNG fuel. "For some, the detour is deemed excessive and they don't come irrespective of the fuel they are using, but right now LNG is cheaper than fuel oil on an energy equivalence basis so for some if they have enough time it can still be worth it," said a second Atlantic-based trader.