An expected warm winter in North Asia and Japan could be beneficial to the residents of these colder climates, but it starts to play unemployment with LNG and LNG carriers. Japan's Meteorological Agency and the Meteorological Bureau of Australia said that a few weeks ago there was a 70% chance of a El Nino weather model this year, which can lead to unusually mild winter in the northern hemisphere.
Meanwhile, gas storage levels in Japan and South Korea are estimated to be the highest in at least 2015, Reuters reported on Friday, mentioning traders and data from the Eikon Refinitive. Storage tanks are also filled in China before winter.
The North Asian natural gas inventory usually reaches a peak in October, before significant reductions begin, but this year there are no signs of declining stocks. In fact, according to a source, at least one utility is already starting to load the unwanted winter load on the spot market, which already sees the prices of super-cooled fuel drops at unusually low levels, a different price scenario from just four or now five months.
Asian LNG spot prices rose four years in the summer, as buyers in North Asia competed for cargoes with Mexico and Egypt, despite the supply disruption by world producers, and warmer Asian temperatures have persisted, which which has led to increased electricity consumption. Production declines in the US, Australia and Malaysia also increased deliveries, while LNG trading volumes in Asia were also backed by repopulation of inventories exhausted by South Korean and Japanese companies after a stormy winter unusual. Spot prices for delivery in June were set at $ 11.60 / MMBt – a massive increase in fuel prices in the same month of the previous year, which reached just under $ 6 / MMBt. Related: Will Solar Survive Commercial War?
Now, with full storage levels, LNG-AS was traded late last week last week, at the price of $ 10.20 / MMBtu, the lowest on August 10th. Not only the storage level and the anticipated winter season have reduced price pressures, it is the nuclear power sector.
Following the 2011 Fukushima nuclear disaster, Japan subsequently closed 54 nuclear reactors, creating a supply shortage for LNG at the time, with an upward pressure on prices. By the beginning of 2014, the LNG location in Asia was over USD 20 / MMBTU. Now, nine nuclear reactors that were shut down in 2011 received regulatory approval to restart, with seven of them already in operation, more than most analysts expected.
Petroleum LNG tanks
With storage levels in Japan, China and South Korea (the three largest LNG importers in the world) exceeding the volumes registered in the last three years for this time of the year, LNG tanks also fall into a crude patch. Related: It's all or nothing for the men in Colorado
Six tanks carrying one million cubic meters of unsold LNG, worth $ 200 million, stood in Singapore, one of the largest fuel shopping centers, and in Malaysia's waters for up to two weeks. In the past, shippers have parked their tanks near ports like Singapore, where unused ships can be easily maintained and maintained until new orders arrive. For shipowners, idle tanks mean a loss of daily charter taxes on the ship. In the first part of the year, LNG shipping rates have reached a peak not seen since 2012, according to Drewry's marine research and consultancy firm.
Shipowners with modern DFDE ships have sold their ships at $ 60,000 a day in the second quarter of 2018, which is about 50% higher than the rates recorded in the third quarter of 2017, a report said in World Maritime News. At the end of June 2018, some ships were declared fixed at $ 85,000 a day. LNG spot delivery rates also typically spike during the peak winter season.
It remains to be seen whether the warmer weather forecast will be true, but if it does not happen as expected, the prices for liquefied gas this winter, which is often due to the fact that utilities have to cover the gaps in demand, could also reach at unusually low prices. In addition, if China will have a warmer winter, it will avoid repeating last year when the government hastened too quickly to replace the more abrasive gas with gas, leaving a gas shortage in many northern provinces while the government was forced to industrial end-users for residential users.
By Tim Daiss for Oilprice.com
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