Expect spot LNG at less than $5 by April 2016

Vol 19, PW 8 (17 Dec 15) Midstream & Downstream

Hoping to get better deals, IndianOil and GSPC re-issued November tenders for LNG in the first week of December.

IOC wants three cargoes for January, February and March 2016 delivery while GSPC also re-issued a six-cargo tender. "Neither IOC nor GSPC were happy with their November offers," a LNG trader tells us.

"Spot prices are falling and buyers always think tomorrow will bring a lower price." Benchmark Brent crude dropped below $40/barrel on December 8 leading LNG buyers to predict a corresponding drop in spot LNG prices later this month (December).

Winter demand might push prices up further next month (January) to $7.50-7.80/mmbtu but by February or March 2016 prices are expected to fall below $7/mmbtu and stabilise at around $6.70/mmbtu, say traders. "I then expect spot prices to tumble to $5/mmbtu at 10-12% of crude slope with Brent prices at $45/barrel after the winter (or by April 2016)," predicts one LNG analyst.

"And the price could remain low for a few quarters." This is because more LNG is expected to hit the market in the next six months till June from four LNG trains: Soyo in Angola; Gladstone and Queensland in Australia; and Sabine Pass in the US.

"If there are commissioning delays these LNG trains,” we hear, “then the scenario might change again."