Whiledaily levels have dropped from $150,000 to around $100,000 since the summer dueto reduced production out of Indonesia and Qatar, delays in Angola and a narrowerLNG price spread between Europe and the Far East, analyst Omar Nokta claimsdynamics are starting to improve.
In a noteto clients Nokta explains Japanese and South Korean utilities are importinghigher volumes of gas, which has pushed LNG spot prices up from $13.25 per mbtuto $15.00 per mbtu over the past two weeks.
“LNG spot prices in Europe arecurrently trading at $10.90/mbtu,” he continued. “This Asia/Europe differentialof $4.10 is higher than the lows of $2.00 we had seen in September and October.During the first half of 2012, this spread averaged $4.25.
“We view this widening spread as apromising signal for cross-hemisphere LNG movements, as trading of AtlanticBasin LNG to the Far East has dropped significantly in recent months.
“We estimate a differential of atleast $2.00 to $2.50 is required in order for European traders to profit onbuying spot LNG cargoes in the West and re-exporting to Asia. With the spreadjumping to above $4.00, we expect to see higher trading activity levels and, byextension, firmer LNG shipping demand.”
Nokta believes the onset of winter, awider gap between LNG prices in Europe and Asia, resumption of regular exportsfrom Indonesia and the start of exports from Angola LNG will “serve to tighten”the spot market in the coming weeks.
He says Golar LNG and GasLog arepoised to profit from the uptick.
