Oversupply keeping Asian spot-LNG prices low

Oversupply keeping Asian spot-LNG prices lowImage courtesy of Tokyo Gas

Spot LNG market in Asia dropped to $5.4 per million British thermal units during this week, pressured by concerns of oversupply. 

At the level of mid-$5/mmBtu, the demand has been strong, however, with the arrival of “shoulder months” when the demand weakens the prices are expected to correct, Reuters reports citing a Singapore-based LNG trader.

The rising supply from Australia and the United States has tipped the market towards oversupply, leading LNG buyers to look for more flexible terms in their long-term supply deals.

Long-term deals dominate the Asian market, however, beeing linked to crude oil these prices are trading well above the spot prices at $8.7 per mmBtu. In addition to take-or-pay clauses in these contracts, buyers were not allowed to resell the cargoes.

The abundance of supply and the lower spot-LNG prices have urged buyers to start contract renegotiations and turn more towards the spot market.

Bangladesh’s Petrobangla is looking to cut down the volumes to be delivered on a long-term deal with Qatar, and source more supplies from the spot market, while Japan’s Tokyo Gas has also entered talks to renegotiate the terms to its existing long-term deals.

 

LNG World News Staff

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