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[LNG MARKET ANALYSIS ] 1

LNG Market Analysis

LNG Market Analysis Volume: 11th May 2018


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LNG and Natural Gas Price Assessment 30th April – 11th May 2018

LNG Analysis • LNG prices remained stable to bullish through out the week due to bullish crud & coal prices along with

warm weather, summer demand and bullish European gas hub prices. • Supply is adequate and expected to increase due to three more LNG project commissioning along with

Papua New Guinea and Algerian projects resumption to full production. • As per internal projection models, 105 vessels are expected to load cargoes during 11th -17th May period,

whereas 92 laden vessels will be discharging during the same period. • Domestic Chinese prices kept on rising due to limited gas supply from Central Asia pipeline and weather

is also getting warm. • Asian price closures on Friday; NE Asia for June closed at $8.15/MMBTU, whereas July prices closed at

$8.26/MMBTU, while long-term contract prices are in the range of $8.24/MMBTU-$9.88/MMBTU. • Product receipt during last week, Japan received 1.53MMT (24 vessels), South Korea 0.76MMT (10 vessels),

China .92MMT (13 vessels) and Taiwan 0.37MMT (6 vessels) during the week, NEA region represent 61.8% of a global trade this week.

• MT May receipt: Japan 2.17MMT (35 vessels), South Korea 0.94MMT (13 vessels), China at 1.47MMT (21 vessels) & Taiwan 0.58MMT (9 vessels).

• DES South Asia is calculated around $7.99/MMBTU for June & $8.12/MMBTU for July, whereas FOB ME estimated at $7.48/MMBTU & $7.58/MMBTU for June & July 2018 respectively. Brent based contract price is around $8.74/MMBTU on average for Pakistan and Henry Hub based prices for India at $7.04/MMBTU.



• India imported 0.35MMT (5 vessels), MTD 0.60MMT (9 vessels), while Pakistan received 0.13MMT (2 vessels) during the week, with MTD 0.22MMT (3 vessels).

• North West Europe LNG prices remained bullish due to issues in gas pipeline, lower inventories and bullish crude and coal prices along with warm weather driving demand for cooling.

• NW Europe LNG price closure at $7.15/MMBTU for June and $7.11/MMBTU level for July. • Five vessels are due to reach UK, Netherlands and Belgium during next one week. • South West Europe prices remained stable due to summer-based demand, lower inventory level in France

along with bullish crude and coal prices. • SW Europe LNG price closure for the week is estimated at $7.40/MMBTU for May and $7.32/MMBTU

level for June. • Nine vessels are due to reach France, Spain and Italy during next one week. • Five vessels left from Russian projects with 4 from Sakhalin project for Japan & South Korea & 1 from

Yamal for UK. • Five cargoes left from Sabine Pass export terminal during the week for Asian destinations and Brazil. • France 5, Spain 3, Italy 2, Netherlands 2, while Portugal & Poland received one cargo each. Turkey

received two cargoes during the week. • Chile received two cargoes, while Argentina received one cargo. • Arbitrage window for European reloads still closed for Asian destinations. • US Henry Hub based price is $5.74/MMBTU for US based liquefaction companies, which translate into

margin of $0.99/MMBTU for NE Asia & $0.95/MMBTU for South Asia, whereas $0.82/MMBTU for NW Europe and $1.12/MMBTU for SW Europe.

• NEA May price around $8.15/MMBTU level is estimated to be 11.95% of Brent 3-0-1 basis.

Author’s Conclusion • Crude oil bullish run is attributed US sanctions on Iran, impact to be seen as even if Iranian exports reduced,

there is still lot of crude from OPEC and US to fill that gap. Current bullish run hasn’t impacted the LNG prices, as LNG prices are now more govern on supply and demand fundamentals.

• Henry Hub prices still at a level where US liquefaction companies are getting positive margins for Asian and European destinations, European gas hub prices are keeping LNG prices stable in Europe despite supply is adequate due to low inventory level and start of demand seasons.

• LNG prices remained stable during the week, however keeping in view higher Brent based pricing, spot market now govern by demand supply fundamentals, and currently adequate supply conditions are overwhelming the price sentiments. We expect the prices to remain stable with some minor correction.

Market Analysis • North West Europe: Outlook is for warm weather above seasonal limit. • South West Europe: Outlook is for warm weather. • South America: Warm weather outlook except for Colombia, which is still enjoying mild weather. • Middle East: Summers in Middle East. • South Asia: Summer in full swing. • North East Asia: Warm weather outlook for next two weeks. • South East Asia: Summer season. • North America: Summer in Mexico. US weather; overall outlook is warm across US, with Central and West

region enjoying mild to warm weather.

Crude Oil • US announcement on Iran sanctions has been the single factor dominated the bullish run through out the week

along with issues in Venezuela. • Market will start absorbing the news as overall supply remains adequate and there is ample crude, which can

fulfill the gap. • US Inventory data with more than expected draw down also supported the bullish run

Million Barrels (MBbl) 04-May-2018 27-Apr-2018 20-Apr-2018 13-Apr-2018 Production (MBbl/D) 10.703 10.619 10.586 10.540 Exports (MBbl/D) 1.877 2.148 2.331 1.749 Crude Inventory 433.8 436.0 429.7 427.6 Gasoline Inventory 235.8 238.0 236.8 236.0



• EIA reported 2.71 million barrels drawdown against expectation of 0.20 million barrels drawdown, while gasoline inventory reported decrease by 2.17 million against market expectation of 0.45 million barrels draw down.

• US production touched 10.70 million barrels/Day, increased by 84,000 barrels from last week. • US weekly export declined to 1.87 million barrels/day, while imports at 7.32 million barrels per day. • Brent prices closed at $77.03/BBL, while WTI closed

at $70.59/BBL, with Brent-WTI spread at $6.44/BBL on Friday.

• Future market closure on Friday for Brent front month at $76.97/BBL, with $76.82/BBL & $76.41/BBL for August & September, whereas WTI front month at $70.51/BBL with $70.47/BBL & $70.29/BBL for July & August respectively.

• Crude futures still in backwardation, which emphasize long term over supply situation.

• Baker Hughes oil-rig count increased by 10 and now stands at 844.

Supply Outlook (11th -17th May 2018) • As per forecast model, supply seems adequate with 105 vessels expected to load cargoes.

Project Name Vsl Project Name Vsl Project Name Vsl Project Name Vsl

Sonartrach LNG 7 Qatar Gas 22 Donggi Senoro LNG 3 Petronas LNG & PFLNG 8

Sakhalin LNG 4 Cheniere LNG 5 Gladstone LNG, AP LNG, QC Curtis LNG

7 Tangguh LNG & Bontang LNG 6

Yamal LNG 3 Cove Point LNG 2 Darwin LNG 1 Atlantic LNG 3

Snohvit LNG 3 Brunei LNG 3 Gorgon LNG 2 Peru LNG 2

ADNOC LNG 2 PNG LNG 2 NWS LNG, Pluto LNG & WheatStone LNG 5 Angola LNG 2

Oman LNG 4 Equatorial Guniea LNG

1 Nigeria LNG 7 Cameroon LNG 1

Total 105

Demand Outlook (11th -17th May 2018) • As per forecast model, outlook for at least 92 vessels to arrive at different demand centers.

Country Vsl Country Vsl Country Vsl Country Vsl

Kuwait 0 Poland 0 Taiwan 4 Singapore 5

UAE 0 Israel 0 Belgium 1 Thailand 2

Chile 3 Jordan 0 Finland 0 Argentina 2

Colombia 0 Malta 0 Greece 0 Brazil 0

Dominican Republic

0 Turkey 2 Netherlands 2 India 9

Jamaica 0 Egypt 0 Norway 0 Pakistan 2

Puerto Rico 0 Canada 0 Sweden 0 France 4

China 11 US 1 UK 2 Italy 4

Mexico 3 Japan 20 Indonesia 0 Portugal 0

Lithuania 0 South Korea 14 Malaysia 0 Spain 1

Natural Gas • US Natural gas prices had a range bound stable to bullish run purely on technical parameters and demand

and supply fundamentals are bearish due to off-season in term of demand. • Weather is expected to remain warmer than seasonal limits, which has resulted in reduction in demand from



heating regions, however power sector demand has increased. • EIA reported working gas in storage is 1, 432 BCF as of Friday, 4th May 2018, net increase of 89 BCF; against

expectations of 81 BCF build-up. • Supply remained flat and stood at 85.9 BCF/Day, with demand decreased to 69.3 BCF/Day. • Demand from residential/commercial decreased substantially by 5.2 BCF/Day, whereas power sector

remained increased by 3.3 BCF/Day due to cooling requirement. • Baker Hughes reported an increase by 3 in gas rigs and total number stands at 199. • Henry Hub closed at $2.82/MMBTU, with forward

market at $2.83/MMBTU for July. • North West European gas hub Day ahead prices had a

stable to bullish run due to warm weather, lower inventory levels, reduced gas flows and bullish crude & coal prices.

• Forward prices also took the direction from low inventory level along with bullish crude and coal prices and start of demand season.

• Gas flow from Norway reduced due to planned and unplanned outages at Asgard & Kollsnes processing facilities along with St. Fergus terminals. Russian gas flows from NEL remained reduced through out the week.

• Gas inventory level remained low in NW Europe with Belgium at 7%, Germany 26%, Netherlands at 22% & UK at 27% of storage capacity.

• UK Spot gas price closed at $7.27/MMBTU(53.66P/Thm) on Friday, with front month at $7.22/MMBTU(53.33P/Thm).

• Dutch Spot price closed at $7.23/MMBTU(€20.95/MWH), whereas front month price closed at $7.32/MMBTU (€20.92/MWH).

• SW Europe gas hub prices Day Ahead & forward prices remained bullish through out the week due to low inventory level in France, along with warm weather and bullish crude and coal prices.

• Spain hydro-based electricity generation increased to 11.94 TWH from 11.79 TWH last week, last year the number was at 7.90 TWH.

• French Day Ahead prices: Northern France gas prices closed at $7.26/MMBTU (€20.73/MWH) whereas Southern France gas prices closed at $7.76/MMBTU (€22.16/MWH). Italian gas prices closed at $7.80/MMBTU (€23.06/MWH) and Iberian Gas Day Ahead price at $7.50/MMBTU (€21.42/MWH).

• Front month Northern France closure at $7.30/MMBTU (€20.85/MWH), while Southern France closed at $7.51/MMBTU (€21.47/MWH), Italian gas curve prices closed at $8.05/MMBTU (€23.01/MWH), whereas Iberian gas forward price at $7.48/MMBTU (€21.37/MWH).

Weekly European Gas and LNG Inventory Update on 11th May 2018 One standard size Vessel of 150,000 m3 equals to 3.42 BCF.



LNG Trade Flows 5th – 11th May 2018 (Developed in collaboration with Clipper Data LLC)

Supply – Trade Flows • 96 vessels carrying 6.19 million tons (297.5 BCF) left supply terminal centres.

Demand – Trade Flows • 81 vessels carrying 5.03 million tons (241.7 BCF) reached demand centres.

W-Country- within same country delivery & TBC – To Be Communicated

Disclaimer: This is a personal analysis based upon public information and should not be used for buying and selling of commodities. Source: EIA, REE & GIE.

lng!market!analysis!...gasoline inventory reported decrease by 2.17 million against market...

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