18 July 2018:
Asian industry players are bracing for a strong winter after a summer surge that pushed spot prices for July deliveries to nearly $12/MMBtu. A year ago, July spot prices were $5-6/MMBtu.
While spot prices have eased to mid-$10s/MMBtu after a slew of cargoes were offered, the recent summer price spike is significant because of the factors driving it. The rally was driven by higher oil prices, Chinese buying ahead of winter and short covering by several trading companies and portfolio players.
Industry players who had bet on a slow summer this year found themselves caught out. The flurry of buying activity contributed to a doubling of spot charter rates at over $60,000/d in the Pacific. Supply disruptions were also far more prominent this year, further exacerbating the price hike (see table below). Unplanned supply disruptions were heard of in Papua New Guinea, Qatar, US and Malaysia. At the same time, new projects such as Australia’s Ichthys suffered delays with first production expected to start up by late August. Stronger than expected demand from the Atlantic also boosted sentiment in the Pacific.
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