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Prices of liquefied natural gas (LNG) remain low. Weather forecasts predict a warmer winter season than usual in the northern hemisphere. In fact, last week's spot prices for super-cooled fuel in Asia plummeted by 10%, dropping to their lowest level in three months, an unusual trend for this time of year. Reuters, quoting traders, said LNG spot prices for January delivery in Northeast Asia were estimated at $ 10 per million British thermal units (MMBtu), 90 cents lower than last week .
Factors that continue to put downward pressure on prices are milder weather, LNG storage levels among the world's three largest LNG importers (Japan, China and South Korea) and prices. down from Brent, to which long-term LNG contracts are mainly linked. Although cash purchases are generally not linked to oil prices, they often follow a trajectory of upward or downward oil prices. A Singapore-based trader said that "the big question at the moment is how the weather will change because the market will turn around quickly when it starts to get cold." But until then, the stock level is high in many places. "
Marasmus of LNG
The Japanese Meteorological Bureau said earlier this month that the weather pattern of El Niño appeared to be formed and that there was a 70% chance that the phenomenon would continue in the future. northern hemisphere in spring. At the same time, a US government was predicting an 80% chance of El Nino to persist in the northern hemisphere until the spring. El Niño is a Pacific Ocean climate cycle that occurs every five years or more and has a global impact on weather conditions. The cycle begins when the warm waters of the western tropical Pacific Ocean move east along the equator to the coasts of South America.
World oil prices are also putting downward pressure on LNG prices as oil prices have fluctuated sharply in just over a month after reaching the average price point per barrel of 80 barrels of oil. USD per barrel and US $ 70 price point for US benchmark, West Texas Intermediate Crude (WTI) futures futures traded on NYMEX.
Prices have now fallen by 30% from recent highs, as concerns have been growing over the overabundance of oil supply in the US, Russia and Saudi Arabia, and after Washington sanctioned several countries for their imports of Iranian oil. Related: Goldman: oil prices should rebound in 2019
This additional supply comes as demand growth is expected to slow in the face of the economic recession resulting from the ongoing trade war between Washington and Beijing and further slowing economic growth in emerging economies. The strength of the US dollar is also weighing on oil demand as oil is traded in dollars and a strong greenback adds to the cost of oil imports, particularly hitting hard countries such as India, the Philippines, Indonesia and India. others. However, weak oil prices over the past month have provided relief to countries dependent on oil imports.
The third reason why LNG spot prices in Asia are falling is that storage levels, as already mentioned, are full – especially in China, while energy planners in Beijing are trying to avoid a repeat of last year's fiasco when the government was trying to replace coal with cleaner burning. too quickly in the winter, resulting in a shortage of natural gas and the diversion of cleaner burning fuel from industrial end-users to residential users.
As early as August, China began filling underground gas storage tanks, including the energy giant PetroChina, operator of the Xiangguosi storage facility, injecting gas from Myanmar to fill the vast rooms located 3,000 meters below the summit of the mountain. According to reports, China was seeking to turn hundreds of wells into wells and production into storage facilities after a severe shortage of supplies in winter, depriving them of clean fuel.
By Tim Daiss for Oilprice.com
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