LNG Just Saw Its Biggest Monthly Rise In 4 Years

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LNG Just Saw Its Biggest Monthly Rise In 4 Years

I wrote Tuesday about BP betting big on a new LNG export hub in West Africa. And news yesterday shows there’s a lot more action going on in LNG right now — in fact, it’s one of the hottest commodities anywhere on Earth.

New data on LNG prices showed that shipped natgas has been on a tear this month. With rates for Asian delivery jumping $1.95/MMBtu, to $9.20/MMBtu. As the chart below shows, that represents a 27% gain since November 16.

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Asian LNG prices (blue lines) have jumped 27% since November 16

In fact, the recent price move represents the largest monthly rise for Asian LNG since February of 2013. Showing that things are tight in this market right now.

A big part of that is China. Which saw its LNG imports hit a record in November — rising 47% as compared to the same month in 2015, to a total 2.66 million tonnes.

That leap happened largely due to temporary factors — namely a stretch of cold weather across China. But it does show how Chinese reliance on LNG is growing as part of a strategy to meet rising energy demand.

South Korea was reportedly also a big driver for LNG prices this past month. With that nation buying cargos to replace power generation lost during maintenance of four nuclear power plants.

Those demand factors are now subsiding, likely meaning that prices will moderate somewhat over the coming weeks. But the big jump in LNG shows just how quickly this market can turn — and that potential is continuing to attract major oil and gas players into the sector.

Players like Total — which said yesterday it is buying a 23% stake in U.S.-based Tellurian Investments, developer of the Driftwood LNG export project in Louisiana. Total is paying up $207 million to get into the U.S. LNG supply game here, showing that the major believes there’s a big future in this market.

The recent price action seems to support that business rationale. Watch the movement in Asian LNG prices like the Japan Korea Marker over the next few months — and keep an eye out for more deals being done in the LNG supply space.

Here’s to gassing up,

Dave Forest

Article by Pierce Points

Updated on

Dave Forest writes Pierce Points Free Daily E-Letter, an advisory on mining and energy read every day by BP, Rio Tinto, JPMorgan, BNP Paribas, Repsol, GDF Suez, GE, Platts, Warburg Pincus, and the UN. Sign up for free at www.piercepoints.com. Mr. Forest has funded and managed over $80 million in global exploration and development in natural resources, and continues to design and develop projects globally. He is a professional geologist.
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