Asian spot liquefied natural gas (LNG) prices have seen a slight increase this week, driven by concerns over supply disruptions. Workers at Chevron’s Australia LNG projects have escalated their industrial action, while feedgas intake at the U.S. Freeport plant has dropped below normal capacity.
Industry sources estimate that the average LNG price for October delivery into northeast Asia rose to $13.00 per million British thermal units (mmBtu) from $12.90 the previous week. The average price for November delivery is projected to be around $14.00/mmBtu.
The strikes at Chevron’s Gorgon and Wheatstone plants in Australia, which contribute to more than 5% of global supply, have been extended for six days, allowing unions to strike for up to 24 hours a day. They have also refused tasks such as loading tankers. Despite these strikes and a fault at the Wheatstone plant that cut production by 25%, Chevron has continued to export LNG.
On the other hand, Freeport LNG, the second-largest U.S. LNG exporter, has cancelled four cargoes due to a drop in feedgas intake. This has kept traders cautious and contributed to the upward pressure on LNG prices.
Alex Froley, an LNG analyst at data intelligence firm ICIS, highlights the significance of these supply disruptions. The Australian plants involved in the strikes represent around 5-6% of global supply, while Freeport accounts for approximately one fifth of the U.S. capacity. However, complete shutdowns are not yet anticipated.
Samuel Good, head of LNG pricing at commodity pricing agency Argus, suggests that around four cargoes have already been cancelled at Freeport LNG due to the feedgas supply slowdown. He also mentions that some market participants are exploring options for sub-letting ships due to the loss of loadings and high spot charter rates.
The disruptions at Freeport, along with maintenance extensions in Norway and China’s Sinopec unit, Unipec, issuing a peak winter tender, have contributed to a generally strong week for gas prices at the Dutch TTF hub in Europe. The market is expected to remain choppy in the near term.
Floating storage in northwest Europe from October until November is proving to be more profitable, leading to higher spot LNG freight rates. Atlantic rates rose to $182,750/day while Pacific rates rose to $187,750/day, according to Henry Bennett, head of pricing at Spark Commodities.
It remains to be seen if these supply concerns will escalate into major shutdowns, but for now, companies are not scrambling to secure alternative cargoes. However, if the situation worsens, it is likely that prices will rise further.
In conclusion, supply concerns at Chevron’s Australia LNG projects and Freeport LNG have led to a slight increase in Asian spot LNG prices. Market participants are closely monitoring the situation, and if disruptions worsen, prices could continue to rise.