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Latest issue of The LNG Markets
Highlights of Issue :

A global rebound from Covid-19 combined with extraordinary demand for winter LNG cargoes, lowest EU gas storage level in five years and gas supply trouble in the US- first due to hurricane Ida and now hurricane Nicholas has pushed natural gas and LNG prices to its record high level.
Early in September, Hurricane Ida disrupted sizable feed gas supply in the US and now on Sep 14 hurricane Nicholas knocked out Freeport LNG liquefaction facility on the Texas Gulf Coast.

Kamlesh Trivedi



Trade Overview
Steep rise in winter prices feared by Asian European importers
  LNG Trade Summary
Steep rise in winter prices feared by Asian European importers

LNG importers in Asia and the European region apprehend a steep rise in spot prices for winter cargoes as the gap between demand and supply continue to widen. JKM assessment for Oct crossed $18, backed by sustained demand from for LNG for winter months.  
Broadly, winter prices would reflect a combined impact of three factors which include Chinese LNG procurement, depleted European inventory levels and increased supply of Russian gas. Chinese LNG demand for winter seems to be the most significant one to influence prices. Leading Chinese importers have managed their LNG requirement partially through strip tender closed and awarded during second quarter of 2021. However, the second tier importers from China likely to look for spot volume through shoulder months.
Chinese end-users, worried about rising spot prices, have also started using more piped gas over spot LNG. China which imports natural gas from its neighbouring countries, had received 10billion cubic meters of gas from Russia since later started gas supply to China in Dec 2020. Russian Power of Siberia pipeline has total capacity of 2.2tcf out of which 1.3tcf has been dedicated to China. Total Russian natural gas supply to China will increase to 34bill cubic meters per year from 2024 under 30 year, $400 billion contract, signed between Gazprom and China National Petroleum Corp (CNPC) in 2014.
Some of the bulk industrial consumers may also seek additional volume through their respective oil linked long term contracts, using upward quantity tolerance in SPA,  from the suppliers. Mix of piped gas and basket of long term and spot LNG will help Chinese importers meet much of its winter requirement.
Depleted European inventory levels during harsh summer months in 2021 first half, could also result into further spike in LNG prices for delivery through 2021 to early part of 2022. European and North Asian buyers expected to pace winter buying for October and beyond. Nord Stream 2 gas supply from Russia was expected to offer some cushion in winter months. However, German court’s ruling early this week, may compel Russia to auction part of Nord Stream 2 pipeline capacity, resulting into delay in gas supply for Germany. German court ruled early this week, that the pipeline is no exception to European Union regulations that requires gas supplier and the pipeline owners to be two different entities to ensure fair competition.
Some of the European importers have avoided prompt summer buying and avoid higher spot prices and remain dependent on existing inventories. Importers from Europe, left with limited options, also needs to replenish their inventory levels soon and avoid supply trouble. Most recent queries were about delivery for cargoes during peak winter months leaving no space for prompt volume.
All major market players do not rule out the wild cards like warmer than usual winter in 2021-22 and increased piped gas supply in China from Russia. Both could dampen the spot prices for winter.  
- Kamlesh Trivedi

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