SINGAPORE: Asian spot liquefied natural gas prices retreated this week from a near one-year high with demand easing after North Asian utilities had mostly covered their requirements for winter.
The price of LNG for January delivery dipped 20 cents to $7.10 per million British thermal units (mmBtu), trading sources said. Spot LNG prices in Asia had been in a bull market since September, rising 37.7 percent and posting continuous week-on-week gains. But the momentum in the market has since eased due to weaker demand from North Asia.
Demand from the Japanese and South Korean utilities has weakened after aggressive buying in the preceding weeks.
"I think Kogas is balanced now. They may buy prompt cargoes if it is colder but right now, Kogas is not buying," a Singapore-based trader said, referring to South Korea's state-run gas company.
Market participants do not expect spot prices to pick up unless temperatures in North Asia fall below expectations.
"There is the cold factor ... if it is really cold there will be additional purchases," a second trading source said, adding that he saw some pockets of demand from traders covering short positions in the market.
The LNG market is focused on Egypt's buying tender that is seeking a total of 96 cargoes for delivery over 2017 and 2018, with an option to purchase 12 additional cargoes.
The tender is due to be awarded on Nov. 27. The massive tender could see Egypt soak up eight cargoes a month in the first quarter of next year.
"There are people who reserved cargoes for it," said a third trader based in Singapore, adding that in the event that offers to Egypt were unsuccessful these cargoes could return to the spot market and potentially weigh on prices.
Arbitrage opportunities for reloads from the Atlantic basin to Asia is closing as the spread between Asian spot levels and UK's NBP prices narrows.
Reloads from Europe to Asia would have to be sold at around $7.50/mmBtu to make economic sense, traders said.
"Before (Atlantic basin cargoes) reach the Far East, they end up in the Middle East and India. Usually Far East is not paying much more than the Middle East to make the cargoes go all the way, especially because they have Australia and other supplies here," the second trader said.
Angola LNG is likely to have awarded its sell tender for the Nov. 15-17 cargo at around $7/mmBtu to Trafigura, and its most recent Nov. 18-20 cargo at around parity to NBP prices, traders said.
The lower price for the later cargo is likely due to the destination restrictions that did not allow sales to the Middle East and India, they added.
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