LNG tenders, outages and short-covering drive Asian prices

7/15/2016

(Reuters) Asian LNG prices rose further this week due to new tenders and extra buying to replace lost output at Gorgon in Australia and short-covering by traders.

Prices for August and September delivery in Asia traded at similar levels of around $5.75/MMBtu, signifying a full dollar premium to British benchmark prices - driven partly by sterling's sharp devaluation.

The widening spread is reopening possible trade routes with Asia and other regions as cargoes get reloaded from British and Dutch ports.

Prices for August traded at $5.25 per MMBtu last week.

Spot prices jumped on reissued tenders by Argentina's Enarsa and India's GSPC, Egypt's 15-cargo requirement for September through December, along with demand from Japan and Taiwan.

Falling Angolan output following export of a fourth cargo suggests the plant is shutting down for a final phase of tests, traders said, further tightening supply.

September prices may hit a 2016 peak, after which new supply from Gorgon and Angola as well as US plants should usher in a bearish winter, a trader said.

However, the shock shutdown of Britain's largest gas storage site Rough for the winter on Friday may spur fresh jumps in UK gas prices, up 8 percent already.

Spooked by rising prices, price-sensitive importers India and Argentina backed out of awarding tenders this week, and quickly reissued them.

India's GSPC, initially seeking two cargoes for late August, has extended its delivery period to mid-September, in a new tender.

Argentina's state-run Enarsa only awarded around three of 10 shipments sought for late August-September delivery, reissuing a new tender seeking around 10 cargoes again, traders said.

A continuing shutdown at Chevron Corp.'s Gorgon export plant in Australia left Japanese buyers short of supply with replacement cargoes sought via spot markets, traders said.

Two Japanese players were heard to have issued tenders for supply, one market source said.

In the Middle East, Egypt was expected to launch a tender for around 15 cargoes delivering in September-December either next week or the week after, a trader said.

Talk that the tender would be cancelled due possibly to a government-to-government deal between Egypt and a supplier proved unlikely, according to some traders.

"Everybody sees the G2G deal as a way to avoid the tenders and so companies are trying to get through this way, but I don't think Egypt will settle for this," one said.

Egypt typically purchases supply via tenders, assuring itself of a competitive price, a format likely to continue, traders said.

"The only successful G2G deal Egypt had was with Algeria, which has now ended, but others like with Gazprom only resulted in one delivery, Rosneft also delivered one cargo before that deal was cancelled," one said.

France's EDF and Engie both tried to establish supply deals to Egypt through government channels, as well as PetroChina, he said.

Reporting by Oleg Vukmanovic; Editing by Greg Mahlich