By CS LNG, Nov 19 2018 11:11AM
1. TANKERS STORING LNG IN ASIAN WATERS DOUBLE AS PRE-WINTER DEMAND DISAPPOINTS
Tankers storing LNG in Asian waters have more than doubled in number since late October as traders have been caught off guard by warmer-than-expected temperatures that have capped demand and pulled down prices. Spot market demand ahead of winter has been slowed by the forecasts for warmer temperatures this year in North Asia, with onshore storage tanks filling up. "People were expecting China to buy as much as last year in the spot market, but the weather so far has been quite mild and I don't think they were anticipating that," a Singapore-based LNG trader said. LNG prices last year climbed steadily from mid-July to January as China's gasification push for winter heating sparked higher imports. But this year, buyers from the world's top natural gas importer — via pipeline and tanker — have been spreading out their purchases more. Now about 15 to 20 LNG tankers holding at least 2 million cubic metres of LNG worth more than US$400 million at spot market prices are floating in Asian waters, industry sources said. That's up from a half-dozen tankers being used for storage in Asia three weeks ago. Globally, the number of such LNG tankers stands at 20 to 30, one of the sources said. This has helped to drive up LNG tanker rates to record highs, the ship broking and trading sources said. Most of the traders storing cargoes in the tankers are "seeking better winter pricing ... holding out against rising charter rates to achieve an acceptable profit on the molecules," shipbroking firm Braemar said in a weekly LNG report last week. This is "creating pain for those producers who are still forced to lift cargoes from terminals which are approaching tank tops." Refinitiv Eikon data shows at least eight tankers storing LNG in Singapore waters while two were in Malaysian waters. More than five vessels that had been storing LNG are now on the move or have discharged the cargoes, the data shows. Storing LNG on tankers out at sea, unlike crude oil, is generally seen as a risky bet, given the high costs of storage and the fact that cargoes degrade over time by evaporating.
[Source: The Edge Markets 15/11/2018]
CS LNG comment: And this explains the rise in charter rates in the short term so when these cargoes are delivered the rates come crashing down in Asia but maybe premium rates can be achieved in the Atlantic.
2. SINGAPORE'S PAVILION MULLS INVESTING IN NOVATEK'S LNG PROJECT
Pavilion Energy said on Tuesday it has signed an initial agreement with Russian natural gas producer Novatek for the Singapore company to consider participating in Novatek’s Arctic LNG 2 liquefied natural gas (LNG) project. The companies will also collaborate on marketing LNG, cargo swaps and trading as well as joint investments and commercial arrangements for shipping and transhipment facilities, Pavilion said in a statement. [Source: Reuters 13/11/2018]
CS LNG comment: A variation on an old saying “You can take the man out of Russia but you can’t take Russia out of the man!” Frederic Barnaud recently left Gazprom to take over at Pavilion. But how will this sit with the US?
3. NATURAL GAS JUMPS TO 4-YEAR HIGH IN PANICKY TRADING AS SNOW, COLD PUSH ACROSS US
Natural gas prices surged to a more than four-year high in panicky and volatile trading Wednesday, after the latest cold weather forecasts raised fears that the U.S. is heading for a potentially colder-than-expected winter with too little gas supply. Futures for December settled up 18 percent at $4.837 per mmBtus but had been up as much as 20 percent in an early morning rush of panic buying. Prices also rose across futures contracts that that would cover the winter months through March, indicating that prices could be pressured all winter by dwindling supply, which is at a 15-year low for this time of year. CME Group said trading in natural gas futures hit an all-time daily volume record of more than 1.2 million contracts, as the price had its biggest one day jump in years. The price for the front month futures for Decemeber is now the highest since Feb. 26, 2014. "Overnight, there was another round of cold trends, and that kind of lit the fuse and everything exploded," said Jacob Meisel, chief weather analyst at Bespoke Weather Services. "Some of the later overnight weather models trended much colder...the six to 10 and 11 to 15 day [forecasts] both saw rather significant cold trends. It wasn't like we were looking at periods of very major sustained warming. We've just been continually trending colder and colder." Meisel said the price could get to $7 or $8 per mmBtus, if the months of December and January are very cold. "This looks like a capitulation move today, but if cold weather really takes off, the sky is the limit," said Meisel. As forecasts have been adjusted for colder temperatures, natural gas prices have been on a tear, and are now up 49 percent since the start of November. [Source: CNBC 15/11/2018]
CS LNG comment: This could be bad news for US exports as this will certainly push up the cost of US LNG exports which invariably have a Henry Hub element in the pricing formula.