--DES Northeast Asia

Last Friday, the DES Northeast Asia market climbed to a level just above $20.00 for first-half and-second-half May delivery market. Natural gas prices in Europe increased in line with strong crude prices amid a growing sense of uncertainties over the ceasefire talks between Iran and the US, sending DES Northeast Asia prices higher. Production in Australia's LNG project was stopped, which also helped buoy the DES Northeast Asia market. Inter-month spreads between second-half May and first-half June delivery were at 20cts in backwardation, narrowing by 30cts from the previous day. "Thet impact of the closure of the Strait of Hormuz is largely digested in prompt prices and the market reaction is now limited," said a Japanese analyst. "But market players start to focus on a possibility that tight supplies would continue from June onward. If inventories for prompt-loading are drawing down, market players would need to replenish inventories from June onward," said the Japanese analyst.

In Australia, tropical cyclone Narelle approached the country's west coast on Mar 26. To ensure safety, US-based Chevron temporarily suspended operations at the 15.6 mil mt/year Gorgon project and the 8.9 mil mt/year Wheatstone project. Chevron expects to resume operations as soon as safety is confirmed, but with LNG supplies from the Middle East already declining, these production issues in Australia have caused prices to rebound. In the spot market, British Shell procured a cargo for May 1-3 delivery from European Glencore at $19.67 on Mar 26. While Shell remains active in procuring May-delivery cargoes, Glencore--which had been buying large volumes of April-arrival cargoes--has shifted to a selling position.

In Japan-bound trade, many players are paying close attention the trend of LNG demand for power generation. In the day-ahead spot market on the Japan Electric Power Exchange (JEPX), the 24-hour average marked Yen 14.08 per kilowatt hour for Mar 27 delivery. The market fell for two days in a row, but still stayed above Yen 10 since the middle of March. Some players noted, "This is a beginning of price spikes." The three-month forecast for April through June released by the Japan Meteorological Agency on Mar 24 predicts an extremely high probability--60% to 70%--that temperatures nationwide will exceed the seasonal average. "While heating demand in Japan is expected to fade early in April, cooling demand may emerge starting in June," said a Chinese end-user.

Meanwhile, the Japanese government plans to increase the utilization rates of coal-fired power plants in the near term. It plans to operate older, high-emission coal-fired power plants at the same utilization rates as newer models. An market source noted that this could reduce annual LNG consumption by approximately 500,000mt. The 1,356MW No6 reactor at the Kashiwazaki-Kariwa nuclear power station, scheduled to resume commercial operation in April, is expected to reduce LNG demand by more than 1 mil mt annually. Annual imports from Qatar and the United Arab Emirates (UAE) are estimated at approximately 4 mil mt, but the source calculates that the restart of coal-fired plants and the No6 reactor at Kashiwazaki-Kariwa could reduce LNG consumption by at least 1.5 mil mt in total.

Some end-users began to move to secure forward delivery cargoes. Taiwanese CPC Corp closed its DES buy tender on Thursday for a cargo per month to be delivered in July to September. CPC was reported to have met its demand for prompt delivery, but as Taiwan has high dependency on Middle Eastern LNG, CPC apparently wants to procure forward delivery cargoes as early as possible.

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

In the Middle East, state-run Oman LNG floated a DES sell tender closing on Thursday. Offered in the tender was a cargo from the 11.40 mil mt/year Oman project for first-half May delivery to Northeast Asia, Southeast Asia or South Asia. Sources had previously pointed out that LNG supply from the project would decrease sooner or later, but the magnitude of the drop was currently only 10,000-20,000mt per week compared to late February.

Buying interest from South Asia was robust. State-run Indian Oil Corp (IOC) procured one cargo for Apr 6-8, 10-12 or 14-16 delivery at $17.65 via its DES buy tender closed on Wednesday. Indian state-run GAIL also bought a cargo for Apr 1-20 delivery at $17.75 via its tender closed on Wednesday. Spot demand from Bangladesh was strong as well. State-run Rupanta Prakritik Gas Co Ltd (RPGCL) bought a cargo each for Apr 24-25 and Apr 27-28 delivery from French TotalEnergies at $19.77 through its buy tender closed on Wednesday on a DES basis.

--FOB Atlantic, DES Europe and South America

In the US, US Cheniere has announced plans to bring the 1.4 mil mt/year liquefaction train 5 at the Corpus Christi project with a maximum capacity of 25 mil mt/year online within a few days. The supply of feed gas to the project has been on an upward trend since the start of this week, reaching above 2.5 billion cubic feet per day on Mar 25.

In Europe where inventory replenishment will begin, spot discussions are active. A spot cargo for April delivery was traded at a discount of 44-46cts to the Dutch Title Transfer Facility (TTF) natural gas quotations for April. For first-half May delivery, bids were placed at discounts of 40-50cts to the May TTF quotations, with offers countered at discounts of 30-40cts to the quotations.

In South America, Colombia's state-run Calamari LNG was found to have purchased one cargo for prompt delivery through a tender closed on Mar 20. Against the backdrop of domestic gas shortages in Colombia, increasing LNG imports has become an urgent priority.