Asia spot steady, stronger prices seen for 2011

PERTH - Asian spot prices of liquefied natural gas (LNG) held steady between $9.50 and $10.00 per million British thermal units in a quiet market ahead of the New Year holiday, analysts and traders said on Friday

By (Reuters)

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Published: Fri 31 Dec 2010, 3:42 PM

Last updated: Mon 6 Apr 2015, 10:12 AM

Although Asian spot buying has been slow in recent weeks, with major importers Japan and South Korea well supplied ahead of winter, forecasts for a colder winter will likely increase demand for cargoes in late Januaray and February.

“We’ve seen a few tenders come out with some more buying interest in Asia, not for December, more for January and February,” said one trader based in Asia.

Taiwanese buyers are said to be looking for cargoes, and a smaller South Korean buyer is looking to buy one parcel, the trader said.

Spot prices were quoted between $9.50 and $10.00 per mmBtu, roughly in line with prices seen over the previous few weeks.

With a chilly winter forecast for the northern hemisphere, prices are set to rise in the new year and are likely to climb above $10 per mmBtu, market sources said.

“There is an expectation now that things are going to tighten, that demand is still with us and that mainly in this region from Japan, South Korea, and China,” said Tony Regan, an analyst with Tri-Zen Capital based in Singapore.

“If UK continues buying, that should bring spot prices up quite considerably,” he added.

British prompt gas prices were stronger on Thursday as exports to Belgium and a reduction in storage withdrawals tightened supply, despite milder weather.

“With storage concerns remaining an issue, prompt prices have been little affected by the immediate thaw,” said Paul Horsnell, Barclays Capital Research.

RWE brought an LNG tanker into Britain’s Teesside Gasport, the German energy company said, making it the first LNG cargo into Teesside for over a year.

Britain is expecting eight LNG tankers over the next few weeks to meet high gas demand during the peak winter period.

Gas prices in the United States, which recently began re-exporting LNG cargoes due to domestic oversupply, held around $4.30 ahead of the holiday, with a cold snap next week and signs of declining production supporting prices.

Baker Hughes data on Thursday showed the gas drilling rig count fell for a fourth-straight week and government data this week also showed gross natural gas production in October fell for the first time in four months.

The United States began re-exporting cargoes of LNG this year as the domestic gas market remains flooded with shale gas, pressuring prices.

However, the spread between US and British gas prices — which helps determine the flow of LNG in the Atlantic — was $5.35 per mmBtu in favor of Britain on Friday, up from $4.90 last week.

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