[ MARKET ANALYSIS ] 1 Market Analysis Market Analysis Volume: 4 th May 2018
[ MARKET ANALYSIS ] 2 and Natural Gas Price Assessment 23 rd April 4 th May 2018 Analysis prices remained stable to bullish due to summer buying appetite; bullish crude and coal prices as buyers are keen to procure more on Spot due to higher formula based pricing. Supply fundamentals are bearish however overwhelmed currently on bullish crude prices as power companies finding it more economical to run the facility on natural gas. As per liquefaction forecast model, supply seems adequate as regular supplies from Qatar and Australia along with expectation of additional cargoes from Cameroon and Prelude F projects. Demand side seems regular with cargoes reaching to demand centres regularly, as per internal regasification forecast model, minimum of 74 vessels are destined to arrive in next 7 days. Domestic Chinese prices remained stable due to limited gas supply from Central Asia pipeline. Asian price closures on Friday; NE Asia for June closed at $8.07/MMBTU, whereas July prices closed at $8.16/MMBTU, while long-term contract prices are in the range of $8.24/MMBTU-$9.88/MMBTU. Product receipt during last week, Japan received 1.07MMT (21 vessels), South Korea 0.36MMT (6 vessels), China 0.88MMT (13 vessels) and Taiwan 0.32MMT (5 vessels) during the week, NEA region represent 52.5% of a global trade this week. April receipt: Japan 6.50MMT (104 vessels), South Korea 3.03MMT (44 vessels), China at 3.51MMT (50 vessels) & Taiwan 1.55MMT (24 vessels). DES South Asia is calculated around $7.84/MMBTU for June & $7.93/MMBTU for July, whereas FOB ME estimated at $7.43/MMBTU & $7.51/MMBTU for June & July 2018 respectively. Brent based contract price
[ MARKET ANALYSIS ] 3 is around $8.74/MMBTU on average for Pakistan and Henry Hub based prices for India at $6.88/MMBTU. India imported 0.45MMT (7 vessels), MTD 2.09MMT (30 vessels), while Pakistan received 0.16MMT (2 vessels) during the week, with MTD 0.75MMT (9 vessels). North West Europe prices also had a bearish run during the week due to lower demand and arrival of vessel in the region. NW Europe price closure at $6.85/MMBTU for June and $6.90/MMBTU level for July. South West Europe prices remained stable due to higher demand & low inventory level. SW Europe price closure for the week is estimated at $7.12/MMBTU for May and $6.99/MMBTU level for June. 6 vessels left from Russian projects with 5 from Sakhalin project for Japan & Taiwan & 1 from Yamal for France. Six cargoes left from Sabine Pass export terminal during the week for Asian destinations and Mexico. France 4, Italy 3, Spain & Belgium received 2 each, while Lithuania received one cargo each. Argentina received 2, Dominican Republic 1, Puerto Rico 1 & Mexico 2 cargoes during the week. Arbitrage window for European reloads still closed for Asian destinations. US Henry Hub based price is $5.62/MMBTU for US based liquefaction companies, which translate into margin of $1.06/MMBTU for NE Asia & $0.96/MMBTU for South Asia, whereas $0.66/MMBTU for NW Europe and $0.97/MMBTU for SW Europe. NEA May price around $8.07/MMBTU level is estimated to be 11.85% of Brent 3-0-1 basis. Author s Conclusion Crude prices current bullish run is attributable to fear of Iran sanctions, as overall fundamentals are suggesting bearish run on increased production. Impact on prices is bullish as lowest Brent based formula pricing are higher than spot prices. US gas prices bearish run supporting US liquefaction projects as margins still positive for Asian and European destinations, supported by bullish crude prices and Spot prices. European gas prices forward prices are stable as summer based demand along with planned maintenance within Norwegian gas flow and re-stocking activities will keep pressure on prices. prices are stable and will remain stable as bullish crude oil & European gas prices have brought the bullish tinge in prices, overall fundamentals are suggesting a stable run as summer demand season started along with adequate supply, however pipeline gas supply to Europe will remain under pressure as there are some maintenance shut downs during May. We expect to prices remain range bound stable during next week. Market Analysis Weather North West Europe: Next two weeks outlook is for mild to warm weather above seasonal limit. South West Europe: 14 days outlook is for warm weather more than seasonal limits. South America: Outlook is for above-seasonal limits mild to warm weather. Middle East: Summers in Middle East. South Asia: Summer in full swing. North East Asia: Warm weather outlook in North East Asia. South East Asia: Summer season. North America: Summer in Mexico. US weather; Outlook is for mild weather in Northern Rockies, Midwest, West & Northeast, whereas warm outlook for rest of the US. Crude Oil Crude oil prices remained strong through out the week, as Iran sanction fear has brought a premium in the price despite the fundamentals are suggesting a bearish run. Bearish factors are ever increasing US production as US now inching towards the top crude producer slot along with EIA weekly report on inventory build-up. Million Barrels (MBbl) 27-Apr-2018 20-Apr-2018 13-Apr-2018 06-Apr-2018 Production (MBbl/D) 10.619 10.586 10.540 10.525 Exports (MBbl/D) 2.148 2.331 1.749 1.205 Crude Inventory 436.0 429.7 427.6 428.6 Gasoline Inventory 238.0 236.8 236.0 238.9
[ MARKET ANALYSIS ] 4 EIA reported 6.21 million barrels buildup against expectation of 0.74 million barrels drawdown, while gasoline inventory reported an increase of 1.17 million against market expectation of 0.58 million barrels draw down. US production stands at 10.62 million barrels/day, increased by 33,000 barrels from last week. US weekly export number jumped to 2.14 million barrels/day, while imports at 8.54 million barrels per day. Brent prices closed at $75.00/BBL, while WTI closed at $69.79/BBL, with Brent-WTI spread at $5.21/BBL on Friday. Future market closure on Friday for Brent front month at $74.95/BBL, with $74.59/BBL & $73.84/BBL for August & September, whereas WTI front month at $69.79/BBL with $69.61/BBL & $69.22/BBL for July & August respectively. Crude forward contract backwardation still emphasize on over supply fundamentals. Baker Hughes oil-rig count increased by 9 and now stands at 834. Supply Outlook (4 th -10 th May 2018) As per forecast model, supply seems adequate with 81 vessels expected to load cargoes. Project Name Vsl Project Name Vsl Project Name Vsl Project Name Vsl Project Name Vsl Sonartrach 4 Qatar Gas 18 G, AP, QC Curtis 6 Atlantic 6 Singapore 2 Sakhalin 3 Cheniere 2 Darwin 1 Peru 1 ZeeBrugge 1 Yamal 2 Cove Point 2 Gorgon 2 Angola 2 Snohvit 3 Brunei 4 Petronas & PF Cameroon NWS, Pluto & WS 6 Equatorial Guniea 7 Nigeria 5 Oman 4 1 ADNOC 1 PNG 2 Donggi Senoro 0 Tangguh & Bontang 1 Total 90 4 Demand Outlook (4 th -10 th May 2018) As per forecast model, outlook for at least 74 vessels to arrive at different demand centers 10 th May 2018. Country Vsl Country Vsl Country Vsl Country Vsl Country Vsl Kuwait 0 Puerto Rico 0 Jordan 0 South Korea 12 Norway 0 UAE 0 China 9 Malta 0 Taiwan 2 Sweden 1 Chile 0 Mexico 5 Turkey 2 Belgium 1 UK 1 Colombia 0 Lithuania 0 Egypt 0 Finland 1 Indonesia 1 Dominican Republic 0 Poland 0 Canada 0 Greece 0 Malaysia 0 Jamaica 0 Israel 0 US 1 France 3 Italy 2 Japan 20 Netherlands 2 Singapore 1 Spain 2 Portugal 1 Thailand 2 Argentina 0 Brazil 0 India 4 Pakistan 1 Total 74 Natural Gas US Natural gas prices had a bearish run due to increase in supply along with reduction in demand as weather remained mixed with lower demand from heating requirement regions and outlook is for warmer weather. EIA reported working gas in storage is 1,343 BCF as of Friday, 27 th April 2018, net increase of 62 BCF; against expectations of 48 BCF build-up. Overall supply increased by 0.5 BCF to 85.9 BCF/Day from 85.4 BCF/D last week, with demand decreased to 71.9 BCF/Day.
[ MARKET ANALYSIS ] 5 Demand from residential/commercial decreased substantially by 4.9 BCF/D as weather is getting warm, whereas power sector remained stable. Baker Hughes reported an increase by 1 in gas rigs and total number stands at 196. Henry Hub closed at $2.71/MMBTU, with future market closed at $2.71/MMBTU for June, $2.74/MMBTU for July & $2.75/MMBTU for August. North West European gas hub Day ahead prices has a bearish run as demand reduced due to milder weather, along with improved power generation from wind and solar, bullish factor of reduced supply from Norway and Russia is countered by arrival of vessel along with outlook for more vessel next week. Forward prices also remained stable as they got support fro bullish crude and coal prices along with outlook for warm weather. Gas flow from Norway reduced due to planned and unplanned outages at Skarv processing facility along with St. Fergus terminals. Russian gas flows from NEL remained reduced through out the week. Gas inventory level remained mixed but still low in NW Europe with Belgium at 8%, Germany 24%, Netherlands at 19% & UK at 26%. UK Spot gas price closed at $7.08/MMBTU(52.36P/Thm) on Friday, with front month at $6.91/MMBTU(51.10P/Thm). Dutch Spot price closed at $7.04/MMBTU( 20.07/MWH), whereas front month price closed at $6.98/MMBTU ( 19.89/MWH). SW Europe gas hub prices Day Ahead prices remained stable as weather remained warm, above seasonal limit along with reduced Norwegian gas flows to France while Nuclear and Hydro based power generation remained regular. SW Europe forward prices remained stable on warm weather outlook along with support from bullish crude prices along with adequate arrivals. Spain hydro-based electricity generation increased to 11.79 TWH from 11.25 TWH last week, last year the number was at 8.00 TWH. French Day Ahead prices: Northern France gas prices closed at $7.00/MMBTU ( 19.96/MWH) whereas Southern France gas prices closed at $7.38/MMBTU ( 21.04/MWH). Italian gas prices closed at $7.76/MMBTU ( 22.20/MWH) and Iberian Gas Day Ahead price at $7.25/MMBTU ( 20.67/MWH). Front month Northern France closure at $6.99/MMBTU ( 19.93/MWH), while Southern France closed at $7.26/MMBTU ( 20.70/MWH), Italian gas curve prices closed at $7.68/MMBTU ( 21.89/MWH), whereas Iberian gas forward price at $7.26/MMBTU ( 20.70/MWH). Weekly European Gas and quantities at Storage and terminals (BCF) One standard size Vessel of 150,000 m 3 equals to 3.42 BCF. Belgium France Germany Greece Italy Lithuania Netherlands Poland Portugal Quantity in BCF 4- Mayr- 18 27- Apr- 18 20- Apr- 18 13- Apr- 18 Total 3.51 1.69 1.93 3.06 Capacity Utilization 9% 4% 5% 8% Total 23.81 33.63 51.99 70.04 Capacity Utilization 5% 7% 11% 14% Total 130.84 147.79 170.15 187.08 Capacity Utilization 16% 19% 21% 24% Total 2.18 2.17 2.16 2.15 Capacity Utilization 81% 81% 81% 80% Total 242.57 260.69 279.06 299.86 Capacity Utilization 36% 39% 42% 45% Total 0.27 2.48 1.54 2.73 Capacity Utilization 8% 72% 45% 79% Total 43.56 59.65 77.62 88.42 Capacity Utilization 10% 13% 17% 19% Total 46.69 45.69 49.85 50.71 Capacity Utilization 39% 38% 42% 42% Total 9.29 7.87 9.52 8.26 Capacity Utilization 46% 39% 47% 41%
[ MARKET ANALYSIS ] 6 Spain UK Total 85.43 81.02 87.3 87.35 Capacity Utilization 49% 46% 50% 50% Total 12.09 13.08 22.46 17.28 Capacity Utilization 18% 19% 33% 26% Trade Flows 28 th April 4 th May 2018 (Developed in collaboration with Clipper Data LLC) Supply Trade Flows 91 vessels carrying 6.03 million tons (290.1 BCF) left supply terminal centres. Demand Trade Flows 81 vessels carrying 5.03 million tons (241.7 BCF) reached demand centres. W-Country- within same country delivery & TBC To Be Communicated Disclaimer: This is a personal analysis based upon public information and should not be used for buying and selling of commodities. Source: EIA, REE & GIE.