ATLANTIC LNG: Key market indicators April 8-12

LNG markets have been seeing some support with the gas injection season in full swing as European buyers bid to attract cargoes away from Asia.

Platts, part of S&P Global Commodity Insights, assessed the May JKM at $9.582MMBtu on April 8, up 12.3 cents/MMBtu day on day. The West India market for April was assessed at $9.163/MMBtu.

NWE, Med

European and Mediterranean prices both dropped at the start of the week and then continued to trend up. Bids in the region are becoming stronger to compete with prices in Asia. The arbitrage is prompting cargoes to flow east of Suez, while offers in the Atlantic are limited to the cargoes that do not have the shipping length to do so.

Platts assessed the DES Northwest Europe Marker for May at $8.323/MMBtu April 5, up 18.3 cents on the day and 20.2 cents/MMBtu higher than the since the start of the month. Platts assessed the Mediterranean marker at parity to Northwest Europe and the East Mediterranean at a 25 cents/MMBtu premium to Northwest Europe.

The NWE spread to the TTF Dutch gas hub stood at minus 17.5 cents/MMBtu, some 4 cents/MMBtu narrower on the week. Differentials in the Mediterranean also strengthened, with the East Mediterranean still at a premium to the TTF. The narrow spreads are making imports into the region even more tricky as it gets challenging to cover slot and regasification costs.

Lower LNG deliveries into Europe last month may drive prices higher as the market moves deeper into the injection season. Traders in both NWE and the Mediterranean were heard directing volumes toward Asia, where netbacks were stronger. European and Mediterranean buyers may still have to price higher to compete with Asia and replenish supply this summer.

A picking up in injections over the first half of April could change the arbitrage dynamics and see more offers coming into the Atlantic. Gas storage levels in the EU rose 0.8% on the week and 0.24% on the day to be 59.90% full as of April 6, according to Aggregated Gas Storage Inventory data. Meanwhile, EU LNG inventories stood at 4.422 million cu m.

Americas

Across the Atlantic, the US FOB LNG market reached its narrowest discount to the TTF since 2021.

The Platts Gulf Coast Marker for US FOB cargoes loading 30-60 days forward was assessed at $7.70/MMBtu April 5, up 17 cents/MMBtu on the day and 25 cents/MMBtu higher since the start of the month. Current prices were at a 79.8 cents/MMBtu discount to the May TTF. This marks the narrowest discount since Dec. 31, 2021, when it was at 56.3 cents/MMBtu.

Similarly, the spread between US FOB and Northwest European LNG has also trended closer together recently, with the Gulf Coast Marker's discount to DES NWE narrowing to a nine-week low on April 3 at 59.5 cents/MMBtu. The Platts Gulf Coast Marker was assessed at a 62.3 cents/MMBtu discount to the DES Northwest Europe Marker on April 5.

US LNG exports in April stood at 1.81 million mt as of April 8, according to S&P Global data.

In Latin America, Brazilian midstream company Transportadora Associada de Gas and independent producer Origem Energia plan to develop the country's first natural gas storage project after reaching a non-binding strategic partnership agreement as part of an effort to help reduce Brazil's dependence on imports of the fuel.

Brazil imported nearly 480,000 mt of LNG in Q1 of 2024, compared with no imports in Q1 2023, and almost 1 million mt in 2022, S&P Global Commodity Insights data showed.

Platts assessed DES Brazil for deliveries 15-45 days forward at $8.423/MMBtu April 5, or at a 10 cents/MMBtu premium to NWE.

LNG swaps

Further down the curve, while some strength was being seen in the prompter months for Europe and Asia, the relatively weak contango across the curve in Europe has been providing little support for buying interest.

Platts assessed the May DES Northwest Europe derivative at $8.313/MMBtu on April 5, with June at $8.296/MMBtu, July at $8.324/MMBtu and August at $8.366/MMBtu.

Traders were beginning to see the latter half of the curve for Northwest Europe strengthening, which could help to boost stocking up demand in the coming months. For now, open interest on TTF saw slight decline between May to September.

The market reported seeing the East-West Arbitrage window theoretically open, although there were mixed views on whether margins were large enough to incentivize the flow of cargoes across the basins.

"[The margin] Could be not enough for now but the general trend is rather clear," said one Atlantic-based trader.