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Latest issue of The LNG Markets
South Asia Leading Demand Recovery
Highlights of Issue :
South Asian LNG importers started looking for more LNG, leading towards pre-winter demand. India, Pakistan and Bangladesh refreshed their demand requirement. Series of buy tenders from importers from the region hit the market in last fortnight.  
Trade Overview
Pakistan's PLL awarded April buy tender at 11.05% and 10.89% of Brent prices
Unprecedented rise and fall in spot prices in Jan 2021- events unfolded and analysed
Indian major IOC, GSPC imported two spot cargoes for Mar delivery in low to mid $8
Nine spot cargoes for January delivery were cancelled by the Indian importers
  LNG Trade Summary
Unprecedented rise and fall in spot prices in Jan 2021- events unfolded and analysed
A complete “blood bath or mayhem” in LNG markets - aptly described by many within the industry, had caught many among LNG importers and suppliers unaware or unprepared during the first week of January, 2021.
Spot LNG prices witnessed a sharp spike- as high as around $ 25 to $30 per mBtu during early part of January. Among South Asian importers, Indian importers cancelled as much as nine spot cargoes whereas a couple of suppliers of Pakistan state owned importer Pakistan LNG Ltd (PLL) defaulted in their commitment for February delivery cargoes.
Troubles started brewing, sometime late in December or early in January when unprecedented gap in LNG demand and supply for January and February 2021 delivery cargoes along with cold winter weather, baffled Asian buyers. As one of the industry sources described it, massive drop in LNG inventories added fuel to the fire for the Japanese and the Korean importers. There was a point when LNG inventory started dipping below the threshold point for the Japanese importers and some of the utilities in Japan had switched to fuel oil (FO) fired power plants.
A series of events in early January, which reflected a lack of preparedness on the buyers side, exposed the fact that how vulnerable spot LNG importers are. During the crisis phase, LNG supply was at a critically low level in Asia Pacific region also because some of the liquefaction projects in Malaysia and Australia region were on maintenance shutdown, leaving only the Atlantic region available with free volumes. But again, sudden spike in demand made shipping difficult for the Atlantic cargoes to reach to its Asian buyers.
Some of the deals made during Jan first week, had prices transacted as high as around $13 to $14 among the Indian buyers. The state owned refining major Indian Oil Corp (IOC) had come across a discovered price of $17.5 for a late Jan delivery cargo. At one point, in early January, IOC along with other Indian LNG buyers dealing in petrochemicals, crude oil refining and bulk industries had considered, switching to alternate fuel like FO, replacing expensive LNG. Among bulk consumers like ArcelorMittal Nippon Steel India had to cut down its LNG procurement for January and February for its captive gas fired power plant and 10mil mt/year steel manufacturing plant at Hazira in Western India and switched to power supplied by the state owned power companies. According to sources, ArcelorMittal Nippon Steel India had to cut down its RLNG consumption from around 5.5mil cubic meters per day (mcmd) to 3.5mcmd for power generation.
Among refiners and petrochemical major, Reliance Industries (RIL) had cancelled two to three cargoes scheduled for January delivery window, due to increased spot prices. RIL had switched to alternate fuel and increase use of petcoke in its Jamnagar based integrated refining and petrochemical unit. Going by the market rumours, RIL had not expressed interest in buying spot LNG even for Feb delivery window despite corrections in spot prices.
In fact, close to 12 to 15 spot cargoes had been cancelled for delivery from Jan first week through second half of Feb due to spot LNG market volatility. State owned Gujarat State Petroleum Corp (GSPC) and IOC believed to have cancelled three cargoes each for Jan delivery whereas Bharat Petroleum Corp (BPCL) had cancelled two cargoes and RIL had one cargo cancelled for Jan delivery window.  
  Very interestingly, caught unprepared, sellers too had little idea about the direction the market was heading. As early as middle of December, some traders had offered spot cargo in mid $7 for the mid Jan delivery window to some of the Indian buyers.
Sudden and unprecedented spike in spot prices had also defaulted a few LNG traders. Sources said, traders kept giving excuses like troubles with the Australian and the Asian liquefaction projects for some time but eventually defaulted. Among suppliers SOCAR, ENI and Emirates National Oil Company (ENOC) had apparently defaulted in their commitment to Pakistan LNG Ltd for February cargoes. Later on, PLL had closed a prompt buy tender on Jan 22 and awarded it on Jan 26 for three March delivery cargoes. Out of three cargoes two went to ENI at an average of 13.62% of Brent crude prices for the second and the third week of March delivery windows and one to Qatar Petroleum at 12.73% of Brent for the fourth week of March window. All three were significantly lower compared to previous buy tender closed by PLL for March window and scrapped subsequently.
A series of events, unfolded in early January was a lesson, learned hard way for the LNG buyers, suppliers and traders across the board and interestingly, there was nothing much either side could do about it.
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