Global natural gas prices are soaring as the week gets underway amid increasing demand in Asia and colder weather in Europe.
The Dutch Title Transfer Facility, the dominant price marker in Europe, hit its highest point in nearly two years during Tuesday trading. TTF is moving higher after falling last week amid lackluster heating demand, higher wind generation and strong pipeline imports. Colder weather is forecast for the continent and booming liquefied natural gas (LNG) demand in Asia has also cut supply in Europe.
Spot prices in North Asia were seen moving well above $13.00 on Tuesday after reports surfaced of Trafigura Group Pte. Ltd. purchasing a cargo from Vitol near the $13.50/MMBtu level. Both spot and futures prices continued climbing in the region last week. Analysts at Tudor, Pickering, Holt & Co. (TPH) said European LNG imports for December are down by 37% as a result of cargoes being diverted to Asia on strong demand and higher prices.
A supply crunch has shaped up Asia, where some buyers have reportedly canceled supply tenders as prices have become prohibitive. Bloomberg reported Monday that PetroChina Co. Ltd. has threatened to cancel orders for any company attempting to boost prices by talking about a lack of natural gas.
For U.S. offtakers, the market remains particularly strong as indicated by feed gas deliveries to liquefaction terminals, which continue to run at or near peak capacity. Spreads from the Gulf Coast to Asia on Monday for those with vessels chartered skyrocketed to $6.304/MMBtu for February and remain well above $3.00 for March, according to NGI data. The spread to Europe is also hovering near $3.00 for both months. The January Henry Hub contract continues to find support above the $2.60 range, where it was all last week.
TPH also noted that ongoing supply outages in Australia, Norway, Nigeria and other countries have kept the global market tight. With Asian buyers “scrambling to find cargoes in the region,” the LNG shipping market has moved from “high-speed to hyperdrive,” added shipbroker Fearnleys AS.
Prompt vessel availability is extremely limited, Fearnleys analysts said last week, a situation that’s expected to persist in the months ahead with new vessel requirements recently emerging to cover February liftings. LNG vessel spot charter rates are at two-year highs. A vessel capable of carrying 174,000 cubic meters of LNG is fetching $170,000/day in the Pacific Basin and $180,000/day in the Atlantic Basin, according to NGI data provided by Fearnleys.
The shipping market is so tight that buyers are reportedly expecting to cancel up to 10 U.S. cargoes for February loading due to the lack of vessel availability. Market conditions are perhaps more acute stateside as U.S. exports are considered to be more shipping intensive because the distance to key demand centers is above the global average.
Twenty-two LNG vessels departed the United States during the week ending Dec. 16 with a combined carrying capacity of 78 Bcf, flat from the prior week as exports have been strong, according to the Energy Information Administration.
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