In its January 2020 Australian LNG Monthly report, EnergyQuest states that the LNG market is being buffeted from different directions.
According to the report, although the market was already soft with a warm winter in North Asia and rapidly growing US production, the outbreak of the coronavirus has hit oil prices (to which Australian LNG prices are indexed) and spot LNG prices.
“Brent started the month at US$67.05/bbl (A$96.03/bbl) and rose to US$70.25/bbl (A$101.34/bbl) but then fell steadily through the month to US$54.00/bbl on 3 February, reflecting the expected fall in Chinese oil demand,” the report states.
There has also been a dramatic fall in Asian spot prices with the Platts JKM spot price, dropping to below US$3.00/MMBtu.
“Spot prices have fallen as high inventories, warm winter weather, increased supply and the coronavirus all take their toll. Ichthys is believed to have awarded a spot cargo for at an unbelievably low price in the low US$2/MMBtu’s.”
EnergyQuest says there is also potential for delays in cargoes.
“Our tracking data suggests that Australian exports to China have been largely unaffected, at least so far, but as the largest supplier to China, any disruption to cargoes is likely to impact Australian projects, particularly those at Gladstone.”
Notwithstanding these market shocks, the report says it was pretty much business as usual for the Australian projects in January.
“Total LNG shipments were 7 million tonnes (Mt), slightly lower than the record 7.1 Mt in December. Average capacity utilisation was steady due to good performance at all projects.”
West coast LNG shipments were steady compared with December, while east coast LNG shipments were 1.9 Mt, down by 0.09 Mt in January compared with December. One spot cargo was reported for January loading from the east coast, from APLNG.
The Gladstone LNG producers produced a surplus of 7.5 PJ in January, which is higher compared with December when the producers had a 0.1 PJ deficit.
“There was more surplus gas in January, and east coast short-term gas prices were lower than those in December and lower than January 2019. East coast gas-use for generation was down by 7.0 PJ on a year earlier but up 1.9 PJ compared with December.”