ATLANTIC LNG: Key market indicators Dec 4-8

Strong supply and the return of milder forecasts have been weighing on the Atlantic LNG market, despite spells of lower temperatures.

Platts, part of S&P Global Commodity Insights, assessed the January JKM at $15.492/MMBtu and the JKM Balance Month-Next Day derivatives at $15.960/MMBtu Dec. 4, from $16.067/MMBtu and $16.35/MMBtu, respectively a week earlier.

The West India market for January was assessed at $14.838/MMBtu on Dec. 4.

NWE, Med

** Despite temperatures cooling in parts of Europe and gas storages across the EU falling week on week, prices were still subject to downward pressure. The market remains bearish, with inventories forecast to stay well-stocked until the end of the heating season in February.

** The Platts DES Northwest Europe Marker for January was assessed at $12.981/MMBtu Dec. 1, up 52.10 cents/MMBtu on the day but down $1.442/MMBtu on the week. This was a nearly 10% drop week on week. The Mediterranean marker was assessed at $12.881/MMBtu on Nov. 24, up 52.10 cents/MMBtu and down 68 cents/MMBtu since last week.

** European gas storage was 94.39% full as of Dec. 2, down 3.30 percentage points week on week, according to Aggregated Gas Storage Inventory data. While withdrawals were still picking up pace, with milder temperatures forecast to return in Europe and the Mediterranean, heating demand should be relatively subdued. Additionally, the wave of US cargoes into Europe should help replenish supply as demand gradually grows.

** On the floating side, there are still robust volumes on water, although there is a gradual decline as would be expected entering the winter season in view of heating demand. "I am seeing floating down in Europe w-o-w," said one Atlantic-based broker. "But shipping rates coming off seems to indicate that there should be some re-lets in the market." However, the spot LNG shipping market has been quiet in recent weeks, while rates may come down due to the number of spot vessels increasing and low demand, rates remain persistently high.

Gulf Coast marker

** Platts assessed the FOB Gulf Coast Marker at $11.27/MMBtu on Dec. 1, up $1.14/MMBtu on the day but 52 cents/MMBtu lower on the week.

** Although milder temperatures have persisted in the US, sources suggest that colder forecasts should help to support some strength in the near term. While this may support prices in the US, the strong US LNG exports as well as wavering demand from Europe and Asia toward the latter half of December may weigh on prices.

** US LNG exports in November landed at 7.82 million mt, which was a 1.19 million mt jump week on week, according to data from S&P Global. Around 57% of volumes were headed to Europe, 7% to Asia, 3% to South America and 3% to North America, with the rest still not yet nominated. US LNG exports so far in December stand at 440,000 mt.

** Analysts at S&P Global expect that unseasonably warm weather in early November and strong US production could help keep the market relatively bearish. Fundamentals for winter this year and into early 2024 could point to a tightening market across parts of the US, the current gas inventory surplus over the five-year rolling average could be largely gone by February 2024. However, the analysts added that, even with Golden Pass LNG having advanced its commissioning to Q1 2024, other demand fundamentals will not offer much support early next injection season.

LNG swaps

** Down the curve, prices were under pressure as the temperature outlook and long-term bearish view continued to apply a downward trajectory along the curve. Although activity at the end of the year appeared to be slowing and even open interest in January remained relatively subdued, open interest in February was seen picking up activity. While this may not be driven by fundamentals, the market was still awaiting pressure from an uptick in demand in Asia in the coming months.

** In the NWE forward curve, full-month January was assessed at $12.956/MMBtu, while February 2024 and March 2024 were assessed at $13.190/MMBtu and $13.176/MMBtu, respectively.

** While freight rates out of the US into both Europe and Asia have cooled they have begun slowly recovering. Arbitrage economics also remain relatively volatility, while economics from selling out of the US into Asia over Europe swinging. This suggests that the opportunistic selling of US volumes is still swaying between selling into Asia or Europe. Colder forecasts in Asia and weakening European prices could help to bolster Asia's competitiveness in January and February, although there remains some uncertainty.

** Panama Canal delays have persisted into December, which could still help drive more US tons into Europe. Analysts at S&P Global added that the "question arises as of January 1, 2024, when only five per day booking slots are available, what would happen if the containership traffic -- which takes priority in Panama Canal transit -- via the locks remains at the current level of over 4 per day? That would leave only one non-container ship to transit if lucky."