Global LNG Prices Hold, Supported by Middle East Demand

Asian liquefied natural gas (LNG) spot prices for August delivery were firm on Friday, underpinned by steady demand from the Middle East and the potential for stronger European demand after production cuts at the region's largest gas field.

 

The price of Asian spot cargoes remained $7.30 per million British thermal units (mmBtu), in line with the previous week.

 

The Dutch government this week ordered a further tightening of gas production at Europe's Groningen field in response to a spate of earthquakes.

 

Analysts said that the cut would lead to more imports, pushing Europe's benchmark UK gas hub (NBP) prices higher for the second half of the year, potentially narrowing Asia's LNG price premium to Europe and creating more competition between the LNG destinations.

 

"There was a slight strengthening of pricing ideas arising partially from Groningen field cutting the gas it will produce this year," one trader said, though he added that it was affecting sentiment more than actual deals.

 

"At the same time the Middle East will be looking at cargoes to be supplied there."

 

In recent months countries including Jordan, Pakistan and Egypt have launched new LNG import facilities.

 

"The new buyers are there and they have already indicated that they are going to buy a few more cargoes. Jordan has said they will be tendering for a few more cargoes, Similarly, Egypt has mentioned short-term deals," the trader said.

 

A report from Energy Aspects said that the Middle East and North Africa region is emerging as one of the strongest growth markets, with new LNG projects boosting gas demand in the region by 3.5 million tonnes in 2015 and a further 6.5 million tonnes in 2016.

 

"Summer 2015 forecasts are for demand to be up by 2.1 million tonnes year on year, with Egypt, Jordan and the UAE all contributing to the increases," the report said.

 

Pakistan Oil Company has launched a tender to buy two LNG cargoes for delivery in July, according to a tender document posted on its website this week.

 

Elsewhere, three South Korean companies have issued a joint tender to buy a cargo for delivery in the second half of August, while state-run Indian Oil Corp has awarded a tender to buy a cargo for delivery in mid-July to trader Vitol.

 

A flood of new supply coming on stream later this year in Australia and the United States is capping price upside, however, with flows from new export projects expected to keep downward pressure on prices.

 

Energy Aspects revised its northeast Asia LNG third-quarter price forecast to $7 from $8.


(Reporting by Sarah McFarlane; Editing by David Goodman)