Asia LNG spot prices steady at 3-year high on outages, tender awards, oil

MOSCOW (MRC) - Asian spot LNG prices held steady near three-year highs this week as production problems in Indonesia, higher oil and European gas benchmarks and tender awards lent support, said Hydrocarbonprocessing.

Spot prices for January delivery were unchanged at USD9.85/MMBtu. Renewed Indian demand for spot cargoes in January and beyond helped buoy markets even as traders assessed that the two biggest buyers, South Korea and Japan, may keep a low profile for the rest of winter, barring unseasonably cold weather.

Korea Gas Corp is estimated to have recently purchased 10 cargoes to cover the remainder of its winter needs and Japanese importers showed few signs of topping up stocks for now. It is possible that technical faults affecting Indonesia's giant Bontang export facility - triggering the loss of up to 7 cargoes, or 20% of monthly output - may push Japanese off-takers to seek alternative supply.

There was no sign yet of this happening, with some sources saying Bontang was discussing with suppliers to reschedule deliveries. Exxon Mobil evacuated non-essential staff working in the highlands of Papua New Guinea due to unrest in the area but there have been no signs of LNG export disruptions as yet.

"Beyond India, buyers are pretty shy about showing their requirements," a trader said, due to wariness about triggering further price gains. India's Bharat Petroleum came out this week with two tenders seeking a spot cargo in January and three more spread across May, August and October.

Gujarat State Petroleum Corp sought a delivery in the second half of December. Coal stockpiles across India remain precariously low, adding to pressure for price-sensitive importers to continue buying LNG, despite the fact spot prices hold premiums to long-term, oil-linked contract levels.

Chinese buying has been a key ingredient in the months-long Asian rally, though the extent of residual spot winter demand remains uncertain. PetroChina's terminal in east China is expected to receive 31 shipments this winter through March, with volumes up 21% from a year ago.

China's October imports were the second-highest on record. Further support came from rising Brent crude oil, up nearly four percent from a week ago to USD63.63/bbl, and January gas at Britain's gas trading hub, which rose nine percent during the period.

Additionally, Russia's Sakhalin-II liquefaction plant sold two cargos via tender for January loading at prices estimated to be around USD9.85/MMBtu, traders said. It was not immediately possible to confirm the identities of the buyers.

On the supply side, Angola LNG put up Nov. 28-30 loading cargo for sale via tender on Friday. France's Engie was assessing potential for a reload from Britain's Isle of Grain terminal or France's Montoir in December, holding vessel charter talks. December demand from Turkey was reported by traders.

In Italy, Dufenergy Trading won a tender to supply the OLT floating import terminal offshore Toscana in December. Further forward, Pakistan LNG continued with its pattern of locking-in supply for the spare capacity of its second terminal, the BW Integrity, due to begin operations this month or in December.

The terminal received its first cool-down, or commissioning cargo, from trader Gunvor using the Golar Kelvin tanker. On Friday, Pakistan LNG put out a call for four March cargoes.

The Golar Winter floating storage and regasification unit (FSRU) took on a small cool-down cargo at Spain's Mugardos terminal on Oct. 22 and currently appears to be heading back to Brazil, where is serves as an import terminal.
MRC

MOSCOW (MRC) — The world will still have a surplus of oil by end-March next year, Saudi Arabia's energy minister said, signaling a willingness to extend output cuts when OPEC meets at the end of November on whether to extend caps well into 2018, said Hydrocarbonprocessing.

Khalid al-Falih also said he did not want oil prices to rise too fast and too soon to shock consumers, adding that the exit from production cuts would be gradual to make sure market reaction is smooth. "We need to recognize that by the end of March we're not going to be at the level we want to be which is the five-year average, that means an extension of some sort," he said, referring to inventory levels in the developed world.

"We have gone over 50% in reducing excess inventories but that means we still have some excessive inventories that we need to drain," he told journalists on the sidelines of the UN climate conference in Bonn, Germany. "We don't want any spikes in price that shock the market. We don't want any price movements that are unhealthy for demand. We don't think we've seen any of that yet but that's a potential especially if God forbid we have disruptions in any major country. We're hopeful none of this will happen."

Asked about the most recent spike in oil prices to a two-year high this month he said, "I am not distracted by short-term gyrations in prices and I certainly don’t spend time looking at hedge funds and the flows into financial investment instruments." Falih said it was too early to make an assessment on a possible extension to OPEC's global oil output cuts now, but said Saudi Arabia favors making an extension decision at the next OPEC meeting at the end of the month.

"The Nov. 30 meeting will be an important milestone to announce the way forward. My preference is to give clarity to the market and announce on Nov. 30 what we're going to do." He said Riyadh was in extensive consultations with all colleagues around the world within and outside OPEC.

Asked whether Russia was committed, Falih said: "I have had extensive consultations with my Russian colleagues and I will have some more in the next two weeks, but I know one thing is that the Russians are committed to working with Saudi Arabia and with the rest of the 24 countries that have come together last year." He said OPEC will have a better picture closer to the meeting on market fundamentals that will help in making the decision.

"We are waiting for October data to be fully developed and shared with the technical team," Falih said. "We're also waiting for better projections of the fourth and first quarter which are typically lower demand and we will have picture of supply from sources that are not part of the deal. That will give us better predictions on when markets will balance as well as finishing the consultation."

Asked how OPEC would deal with potential supply shocks to the market including from OPEC member Venezuela where oil production hit a 28-yr low recently, he said OPEC's reaction would depend on the length of the disruption. "If anything is extended then we will take proper action to make sure that consumers around the world are not short of oil."

"I assure you that nobody will be short of oil but at the same time we will not stop our current action until global inventories are rebalanced," he said.
MRC

MOSCOW (MRC) -- Iran is pushing to retain customers for its oil in Asia, hoping that price reductions will boost the appeal of its crude compared with other Middle Eastern supply even as the potential threat of further US sanctions on the country looms, reported Reuters.

The National Iranian Oil Company has in the last few weeks offered spot cargoes, ranging from light to heavy grades, to its term buyers in Asia, after setting December prices at the lowest in years against comparable Saudi grades, three sources with knowledge of the matter said.

The sources declined to be identified as they were not authorized to speak with media, while NIOC was not immediately available for comment.

That comes as US Congress has until mid-December to decide whether to reimpose sanctions on Iran that were lifted in exchange for it limiting its nuclear activity, with President Donald Trump disavowing Tehran’s compliance with the terms of that deal.

"The threat of US Congress sanctions has put pressure on Iran to ‘firm up’ markets via discounts and freight adjustments for its crude," said Tilak Doshi, consultant at Muse & Stancil in Singapore.

NIOC first cut the official selling price (OSP) of Iran Heavy crude against Saudi’s Arab Medium grade for October, before lowering it again for December. That puts the Iran Heavy price for December at the widest discount against Arab Medium in over a decade, data on Thomson Reuters Eikon showed.

Meanwhile, price cuts for Iranian Light placed the oil at its lowest premium in two years against Saudi Arabia’s Arab Light.

The discounts were made to retain existing buyers of Iranian oil, which already have government-backed arrangements in place from when the original western sanctions hit Iran’s oil exports in 2012-2014, the sources said.

Japanese and Indian buyers responded to the price cuts for October by increasing imports and are expected to keep volumes elevated due to competitive prices, trade sources said.

Iran’s offers for December come weeks before the Organization of the Petroleum Exporting Countries and non-OPEC producers meet on Nov. 30 to decide whether to extend a deal to cut production and support prices.

They also follow rising Basra crude exports from Iraq and an increase in Qatari supplies in January that have been putting Iranian grades under pressure, said Ehsan Ul-Haq, director of crude oil and refined products at consultancy Resource Economist.

Still, traders and analysts do not expect a repeat of the battle for market share that was waged prior to OPEC’s 2016 supply cut deal, with Tehran set to maintain steady output of about 3.8 MMbpd and exports of 2.4 MMbpd–2.6 MMbpd.

"They have maxed out their (export) volume unless they can increase production further," said a trader who handles Iranian oil.

We remind that, as MRC informed earlier, in March 2016, The National Petrochemical Company (NPC) of Iran and France-based Total signed an memorandum of understanding (MoU) to build a petrochemical complex in Iran, news reports said on Wednesday. The complex will include a world-scale steam cracker unit in the coastal area. It will be based on a combination of feedstocks comprised of ethane, naphtha and LPG, as well as other available feed. In addition to steam cracker unit, the complex will include relevant downstream units for supplying its products to domestic and international markets.
MRC

MOSCOW (MRC) -- Kuwait Olefins Co (TKOC) has brought on-stream its cracker following a maintenance turnaround, as per Apic-online.

A Polymerupdate source in Kuwait informed that the company has recently resumed operations at the plant. The cracker was taken off-line in end-October 2017

Located at Shuaiba in Kuwait, the cracker has a ethylene production capacity of 850,000 mt/year.

EQUATE Petrochemical Company is the single operator of Greater EQUATE, which includes The Kuwait Styrene Company (TKSC), Kuwait Paraxylene Production Company (KPPC) and The Kuwait Olefins Company (TKOC) under one fully integrated operational umbrella at Kuwait’s Shuaiba Industrial Area.
MRC

MOSCOW (MRC) — Canada's National Energy Board (NEB) will take until at least Dec. 4 to review Kinder Morgan Canada Ltd's appeal over its Trans Mountain oil pipeline expansion, the regulator said on Tuesday, rejecting the company's proposed "expedited" timeline, said Reuters.

The company, a unit of Houston-based Kinder Morgan Inc, last month asked the regulator to intervene after it said it was unable to obtain permits from the city of Burnaby, British Columbia. Burnaby has long opposed the expansion over environmental concerns, and the lack of permits from the city adds to the hurdles facing the USD5.9 B expansion, as North American energy projects face increasing opposition from activists.

Kinder Morgan Canada declined to comment, although in previous regulatory filings it said such cases could result in delays for the expansion, which is scheduled to go online December 2019. In a statement on Tuesday, the NEB said it will hear cross-examinations on affidavits on Nov. 29 and oral summaries on Dec. 4, without saying when it will make a decision.

Kinder Morgan had asked for the case to involve only written submissions to the board, and for that process to conclude by Nov. 10. The company had noted a related case was resolved in a month.

Canadian oil producers, whose landlocked product trades at a discount to the West Texas Intermediate benchmark, say they need additional pipeline capacity to fetch better prices.

The proposed expansion of the Trans Mountain pipeline from Canada's oil-rich Alberta province would nearly triple its capacity to 890,000 bpd and significantly increase crude tanker traffic off the west coast.

Alberta and fellow crude-producing province Saskatchewan have since joined Kinder Morgan in its appeal, while British Columbia has joined on the side of Burnaby.

Saskatchewan Premier Brad Wall on Monday rejected Burnaby's request that the province's attorney general retract his accusation that the city is purposely denying the permits.
MRC