--DES Northeast Asia

In the DES Northeast Asia market last Thursday, second-half May delivery prices advanced to slightly below $21.00 and first-half June delivery prices followed the move. Last Wednesday to Thursday, Iran's South Pars gas field was attacked by Israeli forces and Iranian forces launched missile attacks on the 77.00 mil mt/year Ras Laffan project in Qatar as retaliation. The move reinforced views that it would take a long time for Middle Eastern LNG supply to return to normal. As for the market outlook, "The market tends to form backwardation in inter-month spreads as prices for prompt months rise larger," said a Japanese trading house. On the other hand, demand/supply fundamentals in summer would tighten, so that "From spring to summer, inter-month spreads are likely to form contango," said a Japanese analyst, indicating that the market outlook was opaque.

Spot cargoes for first-half May delivery might be traded at a premium of 5-10cts to the May contract of DES Northeast Asia spot quotations, according to sources. A source pointed out that premium levels would depend on spot supply availability from producers mainly in the Atlantic as well as demand destruction in consuming countries in Asia in the future. Some producers had already moved to sell spot cargoes. In addition to spot sales from Oman LNG that had sold a cargo on a DES basis, Russian Sakhalin Energy was seen to have sold a cargo each for Apr 23 delivery and Apr 29 delivery to Chinese players this week although details such as the price were unknown. On the other hand, a western broker commented, "As fixed prices are forecast to sharply gain, it might be a good opportunity for sellers to sell spot cargoes now. However, the Middle Eastern situation is deteriorating, some sellers may hesitate to sell fresh spot cargoes going forward from the perspective of energy security."

Buying interest appeared to be gradually increasing as well. JERA placed a bid for second-half May delivery to the 19.10 mil mt/year Futtsu terminal at flat to the May contract of DES Northeast Asia spot quotations last Wednesday and Thursday. In Japan, LNG inventories for power generation were built up to 2.30 mil mt, but a Japanese analyst said, "There is strong likelihood that alternative demand for Qatari cargoes may come out in summer. Additionally, even if they do not need to buy alternative cargoes directly for Qatar, the possibility that gas supply/demand will become tighter on the contrary to expectations." With a sharply hike in crude prices, a Japanese power company stated, "It will be inevitable to see a rise in term import costs, which is another concern." Further, there were also views that fuels for power generation would be shifted from LNG to coal in Japan. On the other hand, actual demand was mostly in line with previous years at the moment, and the Japanese power company explained, "It has been surely warm these days, but not particularly different from normal." Apart from that, Marubeni, European Mercuria, and British Shell showed interest to purchase first-half and second-half May delivery. At present, spot supply availability was not necessarily scarce since there were some traders such as European Vitol and British Hartree with cargoes on hand in the market. Last Wednesday, Vitol sold a prompt delivery cargo for Apr 18-20 to PetroChina at a discount of 20cts to the May contract of DES Northeast Asia spot quotations.

--FOB Middle East, DES South Asia and the Middle East

In the Middle East, the liquefaction facilities at the 77 mil mt/year Ras Laffan project in Qatar were attacked, resulting in a massive fire. The extent of the damage to the Ras Laffan project remains unclear, but a Japanese analyst noted, "In the worst-case scenario, repairs to the facilities could take years." Furthermore, the consensus is that the 32 mil mt/year North Field East (NFE) expansion project is unlikely to begin operations within the year. On the other hand, state-owned Oman LNG sold one cargo from the 11.4 mil mt/year Oman project for delivery between Apr 21 and May 10, at a teens discount to DES Northeast Asia spot quotations through a DES-based tender that closed last Tuesday.

Due to the suspension of gas supplies from Israel's Leviathan offshore gas field, Egypt is proceeding with spot purchases of LNG as an alternative. Through a tender closed last Tuesday, the country's state-owned enterprise purchased a total of four cargoes for H1 April delivery at premiums the Dutch Title Transfer Facility (TTF) natural gas quotations. Following the attack on Iran's South Pars gas field, concerns about tightening natural gas supplies appear to be emerging in Iraq and Turkey, which import pipeline gas from the field.

In South Asia with high dependency on Middle Eastern LNG cargoes, spot demand is strong. Bangladeshi state-run Rupantari Prakritik Gas Ltd (RPGCL) conducted a DES buy tender closed lastTuesday for two cargoes for April delivery from Saudi Aramco's trading subsidiary Aramco Trading. The awarded prices were reported at $20.96 for Apr 15-16 delivery and $20.92 for Apr 21-22 delivery. RPGCL is reportedly using loans from the World Bank for spot buying. On the other hand, Indian state-run GAIL closed its DES buy tender on Monday for a Mar 17-31 delivery cargo but the tender was reportedly not awarded.

--FOB Atlantic, DES Europe and South America

In the US, Henry Hub (H.H.) natural gas prices are recently hovering around $3.00 with limited impact from the Iran situation. On the other hand, the Dutch Title Transfer Facility (TTF) natural gas quotations and DES Northeast Asia spot quotations jumped sky high, making US cargoes linked to H.H. quotations undervalued. Many players believe spot trade in US cargoes will pick up. As a matter of fact, US Venture Global apparently obtained greenlight from the US Department of Energy (DOE) to boost output at the 13.3 mil mt/year Plaquemines project in anticipation of growing demand, with an increase of 1.7 mil mt/year projected.

In Europe, Tradable levels for first-half May delivery were heard at discounts of 10-40cts to the May TTF quotations. As for the future market outlook, one view expressed by a Japanese trading company was that "we can expect a scenario where discounts narrow, disregarding regasification costs." Additionally, a Japanese analyst noted that "Europe has committed to meeting its gas storage targets by next winter, so we have no choice but to monitor developments."