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U.S. LNG Fleet Heads To Asia As Spot Prices Soar

LNG

With Asian LNG spot prices almost doubling in three months, a total of nine U.S. LNG cargoes are traveling to northeast Asia, the world’s top LNG demand destination, as the price surge is making U.S. shipment via the Panama Canal more profitable.

According to Platts and its trade flow software, Asian spot prices were $9.75/MMBtu on Tuesday, compared to $4/MMBtu in April 2016, and with around $5.50/MMBtu in the middle of September last year.

Prices have surged since September, due to issues and outages at liquefaction plants, including Gorgon in Australia.

The LNG spot price increase has now made the journey from Sabine Pass in the U.S. Gulf of Mexico to northeast Asia more attractive, after prices had been too low in the first half of 2016. Even after the extended Panama Canal started making the journey shorter, the U.S. LNG cargoes were not rushing to head to northeast Asia in July, August and September.

But in the past couple of months, Asian spot prices jumped considerably, by 27 percent since mid-November, to $9.20/MMBtu in mid-December. This was the largest monthly rise for Asian LNG since February of 2013.

Platts data showed that before December 2016, just one U.S. LNG ship out of 33 cargoes from Sabine Pass had set out for northeast Asia. But now, the surge in Asian spot prices have led to nine cargoes traveling from the U.S. en route to the world’s biggest LNG buyers: Japan, South Korea, China and Taiwan.

Related: Shrinking Contango Points To OPEC Deal Success

China received its second U.S. LNG shipping last month, and data by Platt’s cFlow software shows that the country would welcome “a number of the vessels currently headed to the region”.

Japan, which has not received U.S. shipment yet, is expected to get at least one of the vessels currently traveling to the region, according to Platts.

Since the U.S. started exporting LNG in February last year, cargoes out of Sabine Pass had been mostly heading to South America, the Middle East and South Asia, with South America being the top destination.

The U.S. became a net exporter of natural gas in mid-November 2016.

By Tsvetana Paraskova for Oilprice.com

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