Asian liquefied natural gas (LNG) prices have rallied significantly, but ING Economics analysts believe the rebound is related to supply concerns, not a demand uptick.
Analysts said in a note on Tuesday the Asian LNG market has seen “quite a bit more excitement” than the dull oil market. Prices of the supercooled fuel are now trading back above $4 per million British thermal units (MmBtu), they said.
“There have been reports of a slight pickup in demand, however this does not justify the rally we have seen. Instead we are seeing some supply concerns out of Australia,” the analysts said.
Warmer than usual weather in Japan and South Korea, top global LNG importers, are expected to have contributed to a stronger demand, contributing to higher prices, Kallanish Energy notes.
But ING Economics believes troubles at the Chevron-operated Gorgon LNG plant are fueling concerns of supply disruption. The restart of Gorgon’s train 2 has been pushed back to September, from July, with maintenance work taking longer than expected.
Trains 1 and 3 at the plant will have to be inspected and it’s unclear whether they’d be shutdown for such works and how long this would take. Each of the three trains has capacity to produce 5.2 million tonnes per annum (Mtpa) of LNG.
The analysts have questioned the sustainability of strength in the Asian market, “with stronger prices likely to lead to stronger spot inflows into the region once again.”
September-loading cargoes have reportedly been sold at around $3.90/MmBtu this week, with October-loading cargoes reaching $4/MmBtu.
This post appeared first on Kallanish Energy News.