ATLANTIC LNG: Key market indicators Dec 18-22

Demand continues to outweigh supply as milder temperatures across the Atlantic basin dampen demand from the heating sector.

Platts, part of S&P Global Commodity Insights, assessed the February JKM at $11.907/MMBtu and the JKM February derivatives at $11.990/MMBtu Dec. 18. The West India market for February was assessed at $11.400/MMBtu.

NWE, Med

Milder temperatures across Europe and the Mediterranean, as well as ample stocks, dragged down prices on the week. Sources said most players in both Northwest Europe and the Mediterranean were "well covered until the end of winter," with very little interest for any additional volumes.

Platts, part of S&P Global Commodity Insights, assessed the DES Northwest Europe Marker for January at $9.763/MMBtu Dec. 15 down 62.9 cents on the day and $1.742/MMBtu lower on the week. The Mediterranean marker was assessed at $7.753/MMBtu on Dec. 15, down 60.4 cents on the day and a 94.2 cents drop on the week.

Gas storage levels in the EU fell 2.28% week on week to 88.84% full as of Dec. 16, according to Aggregated Gas Storage Inventory data. While withdrawals have continued, Europe remains healthily stocked to deal with winter. Coupled with strong imports into Europe, this should decrease both freight and LNG flat prices in the near-term, sources said.

While strength in Asia may help to support prices in Europe in the coming months, the current dynamics point to prices weakening. There may be opportunities for more volumes to move from the Pacific into the Atlantic despite the ongoing challenges with taking volumes through the Panama and Suez canals. The number of available spot vessels has flattened out in the Atlantic week on week but has nearly doubled since the start of the month. This should help to cushion prices further.

Gulf Coast marker

Platts assessed the FOB Gulf Coast Marker at $8.21/MMBtu Dec. 15, down 58 cents on the day and $1.65 lower on the week.

Milder temperatures and lower domestic consumption in the US have led to prices tumbling week on week with little expectation for prices to recover in the near-term. Although there may be slight support towards the end of the year as traders close their positions, the above-average weather conditions over the next few weeks are expected to cushion any dramatic price hike. Analysts at S&P Global also expect the overall gas production trend to be "rising slowly, thanks to the cooler weather conditions when compared with the extreme heat last summer."

US LNG exports continued to steadily climb as production remained healthy. US LNG exports in December so far have reached 4.50 million mt, up 1.19 million mt week on week, according to data from S&P Global. Around 48% of volumes were headed to Europe, 3% to Asia and 2% to South America, with the rest still to be nominated.

Analysts at S&P Global expect pressures on freight rates in the new year as further restrictions come into place for Panama Canal transit in January due to the ongoing drought situation there. As a result, increasing numbers of ships will have to rely on alternative routes.

LNG swaps

Further down the Northwest European curve bearish trends still hold, with very little support being seen from now until the end of February. While open interest improves between March to May, selling pressure is being seen in January and February.

On the NWE forward curve, full-month January was assessed at $12.400/MMBtu, while February 2024 and March 2024 were assessed at $10.004/MMBtu and $10.058/MMBtu respectively.

The market still sees a relatively flat curve in the coming months, with low incentive for players to participate in trading activity. Strong supply and high inventories have depressed demand across Europe, with a weak economic outlook also weighing on demand signals. With prices in Asia still not been reacting to colder weather despite colder spells in China as well as stronger economic signals, the market still reflects a healthy supply outlook in Asia with underlying bearish tones determining price moves.

Although freight rates out of the US to Europe and Asia have seen some support, they still remain below the recent peaks in September. US arbitrage economics selling into Asia over Europe have struggled to remain in consistently favorable territory. While colder spells could help attract more US volumes in the new year, traders are still awaiting any significant uptick in demand in January and February from either Europe or Asia.