Warmer Nov to limit Asian spot LNG demand

  • Market: Natural gas
  • 23/11/22

Northeast Asian countries are facing higher than usual LNG inventories ahead of winter, resulting in expectations of limited incremental spot LNG demand throughout their typically high-demand winter season.

Higher than usual temperatures at the onset of winter have likely curbed LNG consumption for power generation to meet heating needs during the month, limiting regional inventory drawdowns.

South Korean LNG inventories for November are estimated to be at an all-time high, much higher over the same period compared with the past three years, according to forecasts from Korea Electricity Statistical Information System.

Japan's main utilities had 2.52mn t of LNG stocks as of 13 November, which was higher by 16.7pc from 2.16mn t at the end of November 2021 and higher by 29.2pc against 1.95mn t, the average of end-November stocks during 2017-21. The latest update on Japan's inventories this week was unavailable with a public holiday on 23 November.

South Korea's state-owned LNG importer Kogas has requested at least one Japanese utility for temporary storage space over 2-3 days to manage its high inventories, underscoring the extent of the surplus that the country is currently facing.

A Chinese national oil company (NOC) is also currently considering delaying the arrival of some of its scheduled deliveries over the next few days, which will likely put off its purchasing plans for the rest of the winter. This may imply that the gas supply glut in China may be more severe than previously expected.

High inventories in China have also seen several offers for domestic swaps between gas companies and utilities in the past 1-2 weeks as they attempted to manage higher than expected inventories. The need to keep inventories at at least 80pc full by the end of October, according to regulations laid out by China's main economic planning agency the NDRC, coupled with weaker than expected gas demand with continued small-scale rolling Covid-19 lockdowns has further exacerbated the supply glut in China.

Around 22 LNG cargoes are expected to arrive in China over 23-30 November, according to Vortexa.

Warmer prelude to winter

Temperatures in China will be 1-2°C higher than usual in east China, while temperatures in north China will be 2-4°C higher than usual for the next 10 days, according to forecasts from the China Meteorological Administration (CMA) last week. That was the fourth time that the CMA has issued above average temperature forecasts since October.

The Korea Meteorological Administration forecasts around a 40pc chance of both normal and below normal temperatures throughout South Korea across 28 November-11 December in its one-month outlook issued on 17 November. The probability of normal temperatures then rises to 50pc over 12-25 December.

The situation is likely less severe in Japan, where a drop in temperatures this week has created expectations that LNG withdrawals may soon increase. Maximum temperatures in Tokyo have dropped to 12-18°C over 20-25 November compared with 15-24°C over 13-18 November.

A Japanese importer is currently on the lookout to buy a few January cargoes. But market participants suggested that this is likely not a firm requirement, as it will more likely continue to monitor LNG consumption levels over the next 1-2 weeks.

The Japan Meteorological Agency's latest forecast for January and February published on 22 November is predicting a 40pc probability of lower than usual temperatures throughout most of Japan, except for the northern half of the country during the latter month.

But most Japanese buyers are unconcerned, with many being confident that they will have sufficient LNG inventories even in the event of a significantly colder winter.

Limited seasonal demand

At least one Chinese NOC has put off its plans to buy spot LNG for the rest of the winter season.

South Korea is also expected to have limited spot demand for the majority of winter, after the country's trade, industry and energy ministry announced its plan to reduce LNG consumption for power generation during the peak power demand period by maximising output from nuclear reactors and coal-fired power plants.

At least one Japanese utility may also have completed spot purchases until February on expectations of balanced inventories and plans to buy supplies from the domestic power market if additional power is needed urgently. The utility had probably bought at least two January cargoes from the spot market previously.

But market participants are wary of continued spot price volatility with threats from Russia's state-controlled Gazprom to cut gas deliveries through Ukraine from the start of next week. This could amplify Europe's appetite for LNG deliveries over its peak heating season, supporting European gas hub prices and pulling up Asian LNG prices as a result.

The ANEA price, the Argus assessment for spot LNG prices, climbed on 23 November to $27.73/mn Btu and $28.21/mn Btu for first and second-half January respectively. This was after the December Dutch TTF contract price closed at $36.718/mn Btu on 22 November, $2.40/mn Btu higher than its close the previous day.


Sharelinkedin-sharetwitter-sharefacebook-shareemail-share

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

News
28/03/24

Mosaic plant sustains minor damage from fire

Mosaic plant sustains minor damage from fire

Houston, 28 March (Argus) — Florida-based phosphate and potash fertilizer producer Mosaic anticipates limited damage to a production plant near Tampa and minimal disruption to operations in the coming weeks following a brushfire on Monday. The brushfire ignited Monday evening during routine maintenance near Mosaic's Riverview phosphate production facility and was initially contained before rekindling Tuesday morning because of heavy winds. The fire was fully under control by Tuesday afternoon, according to local first responders. Mosaic told Argus on Tuesday the fire was not considered a threat to the facility initially, but now expects the plant sustained "limited damage to ancillary operations" and the impact could last between four to six weeks. The Riverview plant has a production capacity of 1.8mn metric tonnes (t) of processed phosphate products, and produces 30,000 t/week, according to Mosaic. The facility was producing phosphates primarily for exports to Brazil at the time of the fire, the company added. Smoke was observed Monday from the fire as a result of foam retardants used by local fire officials to cool the high-density polyethylene pipes. Polyethylene gas piping is often used for natural gas distribution. Natural gas flows delivered to the plant fell slightly Wednesday at 2.42mn cf/d, down from 2.45mn cf/d on Monday, once the fire was extinguished, according to data from Florida Gas Transmission. Flows at the plant on Thursday rebounded to 2.45mn cf/d, in line with expectations that affected phosphate output at the plant should only be temporary. By Taylor Zavala Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Read more
News

Long-term contracts needed to stabilise gas prices: MET


28/03/24
News
28/03/24

Long-term contracts needed to stabilise gas prices: MET

London, 28 March (Argus) — Germany and Europe need more LNG and business-to-business long-term contracts to even out supply shocks and stabilise gas prices, even as demand is unlikely to reach historical heights again, chief executive of Swiss trading firm MET's German subsidiary Joerg Selbach-Roentgen told Argus . Long-term LNG contracts have a "stabilising effect" on prices when "all market participants know there is enough coming", Selbach-Roentgen said. He is not satisfied with the amount of long-term LNG supply contracted into Germany, arguing that stabilisation remains important even now that the market has "cooled down" after the price shocks of 2022. Long-term contracts are important for the standing of German industry, Selbach-Roentgen said — not to be reliant on spot cargoes is a matter of global competitiveness for the industrial gas market, he said. The chief executive called for more long-term contracts in other areas as well, such as for industrial offtakers, either fixed price or index-driven. Since long-term LNG contracts are concluded between wholesalers and producers, the latter need long-term planning security for their projects, which usually leads to terms of about 20 years. But long-term LNG contracts in general do not represent a major risk for MET nor for industrial offtakers in Europe, Selbach-Roentgen said. LNG is a more flexibly-structured "solution" to expected demand drops in regard to the energy transition as the tail end can be shipped to companies on other continents such as Asia if European demand wanes, he said. Gas demand is not likely to recover to "historical heights" again, mostly driven by industrials "jumping ship", Selbach-Roentgen said. When talking to large industrial companies, the discussion is often about the option that they might divert investments away from the German market as the price environment is "not attractive enough" for them any longer in terms of planning security, the chief executive said. This trend started out of necessity in reaction to the price spikes but may now be connected to longer-term "strategic" considerations, he said. In addition, industrial decarbonisation — as well as industrial offtakers' risk aversion because of the volatile gas market following Russian gas supply curtailments — leads companies to invest less into longer-term gas dependencies in Germany, Selbach-Roentgen said. In addition, MET advocates for a green gas blending obligation of 1-2pc green gas or hydrogen, in line with legislative drafts under discussion by the German government. This has already met with interest by offtakers, despite uncertainties around availability and prices, and would provide a regulatory framework that allows firms to prepare for the energy transition, Selbach-Roentgen said. By Till Stehr and Rhys Talbot Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Stalling climate finance an energy security risk : WRI


28/03/24
News
28/03/24

Stalling climate finance an energy security risk : WRI

London, 28 March (Argus) — The "best bet" to achieving global energy security is through mitigation funding and multilateral cooperation, according to the World Resources Institute (WRI). WRI highlighted that governments are funding more domestic renewable energy projects but have increased oil and gas production in the name of "energy security" at home in the years following the Russia's invasion of Ukraine. The recent rebrand of energy transition funding to energy security funding has allowed some developed nations to justify domestic oil and gas licences and drag their feet on multilateral financial commitments. This is causing "real worry" among climate-vulnerable developing nations, WRI chief executive Ani Dasgupta said. He said that although the initial "shock" to the world's energy markets after the invasion of Ukraine "quickly went away", it has triggered "real worry among poorer countries that when push comes to shove, it won't be an even game, or have a fair outcome." Developing countries have long complained about the lack of access to climate funding. Richer nations have only recently met the $100bn/yr target in climate finance to developing countries agreed in 2009, while discussions on setting a new climate finance goal for 2025 at Cop 29 in Baku in November could prove difficult. President of the Republic of Congo (Brazzaville) Denis Sassou-Nguesso said last year that the $100bn/yr in climate financing to developing countries promised by rich countries "never reached us", adding that the annual UN Cop climate conferences have become little more than a talking shop. "Just after the invasion of Ukraine, every country started to think about energy security," Dasgupta said. "In theory, good things could have happened, countries could have concluded that their best bet to getting energy security is by going renewable". But it was not the case in key consumer countries or regions, Dasgupta pointed out. China bought the majority of Russian gas following the EU's withdrawal, he said, and has since upped production at coal-fired power stations despite an "extraordinary" acceleration towards renewables set for 2023-28, according to Paris-based energy watchdog IEA . In Europe, the UK and Norway continue to award new oil and gas licences . "In the US, the fossil fuel lobby argues that the best route to energy security is to invest more in fossil fuels". But the best route is to invest in more renewables, he said. "Even if the US produces a large amount of oil and gas, it is still a traded commodity, and so you have to pay a price for it that is set globally." The US special presidential co-ordinator for energy security Amos Hochstein has also suggested in September that a widening climate finance gap could ultimately threaten global security. "We have seen the percentage of dollars spent on the energy transition outside the OECD, in developing and middle income countries actually go down instead of up…" By Madeleine Jenkins Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Louisiana pipeline crossing bill nears vote: Update


27/03/24
News
27/03/24

Louisiana pipeline crossing bill nears vote: Update

Updates scheduled timing of vote in first paragraph. New York, 27 March (Argus) — The Louisiana state senate is scheduled to vote next week on a bill seeking to clarify pipeline servitude rights and expedite pipeline crossing disputes, advancing legislation promoted by three natural gas pipeline companies involved in a legal battle with US midstream giant Energy Transfer. Natural gas transmission projects by Williams, Momentum Midstream and DT Midstream — which aim to connect growing production out of the prolific Haynesville shale to a wave of new LNG export terminals along the US Gulf coast — have been put on hold while legal proceedings between Energy Transfer and DT Midstream play out. All three companies' proposed pipelines would cross Energy Transfer's own Tiger pipeline in northern Louisiana. The three pipeline companies' projects propose an excessive number of crossings over the Tiger line, an attorney for Energy Transfer argued in a Louisiana senate committee last week, and Energy Transfer has the servitude rights to stop them. But Energy Transfer's "unique" interpretation of the civil code on pipeline crossings is hurting the economy of Louisiana, the author of the bill , Louisiana senator Alan Seabaugh (R), said last week. By blocking the construction of new pipelines out of the Haynesville, Energy Transfer is eliminating jobs and taxes that would be created by new infrastructure, he said. Moreover, by arguing its servitude rights extend above and below its existing pipeline "to the center of the earth," Energy Transfer is "asserting a right that nobody has ever asserted before," Seabaugh said. The Seabaugh bill clarifies that, unless explicitly stated otherwise in a contract, pipeline servitude rights extend only to the physical space occupied by the pipeline and any space necessary to maintain it. The contract stipulating Energy Transfer's servitude rights for the Tiger pipeline is silent on the subject of that vertical, underground space, according to bill supporters. "This really isn't about pipeline crossings — this is about controlling market share," said Jimmy Faircloth, attorney for Momentum Midstream. But the pipeline industry has been amicably working together for decades to allow for reciprocal crossings, Energy Transfer attorney Kay Medlin said. By ripping up this convention over a dispute involving so many crossings, and forcing an expedited legal proceeding for something which "is not a minor process," the Seabaugh bill threatens an industry "that ain't broke," she said. "This legislation will break it, and you will likely spend years trying to fix it, if you ever can," Medlin said. The Seabaugh bill is a companion to two bills which passed 100-0 and 99-0, respectively, in the Louisiana House of Representatives on 21 March. Those bills seek to clarify the law on pipeline crossings and to expedite proceedings on pipeline crossing disputes. By Julian Hast Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Louisiana pipeline crossing bill nears senate vote


27/03/24
News
27/03/24

Louisiana pipeline crossing bill nears senate vote

New York, 27 March (Argus) — The Louisiana state senate is scheduled to vote tonight on a bill seeking to clarify pipeline servitude rights and expedite pipeline crossing disputes, advancing legislation promoted by three natural gas pipeline companies involved in a legal battle with US midstream giant Energy Transfer. Natural gas transmission projects by Williams, Momentum Midstream and DT Midstream — which aim to connect growing production out of the prolific Haynesville shale to a wave of new LNG export terminals along the US Gulf coast — have been put on hold while legal proceedings between Energy Transfer and DT Midstream play out. All three companies' proposed pipelines would cross Energy Transfer's own Tiger pipeline in northern Louisiana. The three pipeline companies' projects propose an excessive number of crossings over the Tiger line, an attorney for Energy Transfer argued in a Louisiana senate committee last week, and Energy Transfer has the servitude rights to stop them. But Energy Transfer's "unique" interpretation of the civil code on pipeline crossings is hurting the economy of Louisiana, the author of the bill , Louisiana senator Alan Seabaugh (R), said last week. By blocking the construction of new pipelines out of the Haynesville, Energy Transfer is eliminating jobs and taxes that would be created by new infrastructure, he said. Moreover, by arguing its servitude rights extend above and below its existing pipeline "to the center of the earth," Energy Transfer is "asserting a right that nobody has ever asserted before," Seabaugh said. The Seabaugh bill clarifies that, unless explicitly stated otherwise in a contract, pipeline servitude rights extend only to the physical space occupied by the pipeline and any space necessary to maintain it. The contract stipulating Energy Transfer's servitude rights for the Tiger pipeline is silent on the subject of that vertical, underground space, according to bill supporters. "This really isn't about pipeline crossings — this is about controlling market share," said Jimmy Faircloth, attorney for Momentum Midstream. But the pipeline industry has been amicably working together for decades to allow for reciprocal crossings, Energy Transfer attorney Kay Medlin said. By ripping up this convention over a dispute involving so many crossings, and forcing an expedited legal proceeding for something which "is not a minor process," the Seabaugh bill threatens an industry "that ain't broke," she said. "This legislation will break it, and you will likely spend years trying to fix it, if you ever can," Medlin said. The Seabaugh bill is a companion to two bills which passed 100-0 and 99-0, respectively, in the Louisiana House of Representatives on 21 March. Those bills seek to clarify the law on pipeline crossings and to expedite proceedings on pipeline crossing disputes. By Julian Hast Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more