In This Article:
* Many traders see spot Asian LNG for Dec capped at $6/mmBtu
* Assessment implies current paper contracts overvalued
* High stocks in Europe would cushion potential supply problems
* Little spot demand seen in Japan, China; S. Korea may rise
By Ekaterina Kravtsova and Sabina Zawadzki
LONDON, Sept 23 (Reuters) - Asian LNG prices will likely be at their lowest, seasonally, in a decade by the end of the year as rapidly rising production outstrips feeble demand, weighed down by a global economic slowdown and the U.S.-China trade war, traders said.
Most trade sources in a Reuters survey forecast spot Asian liquefied natural gas for December delivery to go no higher than $6 per million British thermal units, which would be the lowest for that month since Refinitiv began collecting such data in 2010. <LNG-AS>
They said January and February prices were unlikely to rise much above December's level. Six dollars per mmBtu is lower than the current price of financial LNG contracts, indicating traders see them as overvalued.
Supplies of the super-chilled gas have been boosted in the past year by new terminals in Australia, Russia and especially the United States. This rise has upended gas markets in Europe, bringing continent-wide inventories to multi-year highs.
Spikes in crude oil and European gas prices over the past two weeks failed to alter the bearish mood. Industry sources said low spot buying from Asia and full stocks in Europe were the major reasons for weak prices this winter.
"I don't see a clear premium market this winter. Japan is not growing, India's buying is opportunistic, China was supposed to be the big place, but now it's not. In Europe, once stocks are totally full there is no way this flow continues," one trade source said.
Traders identified potential issues that in a normal year would boost prices - a looming Ukraine-Russia gas dispute, surprise outages, sudden cold snaps like the 2018 "Beast from the East", to name a few. But stocks are so high, Europe could weather such problems.
"You really need a combination of a cold winter in both Asia and Europe and a cut in Russian transit to end the winter with low storage levels," a European-based trader said. "We could survive a strong cut in Russian flows through 2020."
Refinitiv gas analysts sounded a note of caution, however, saying in their winter report that the northwest European market would be tighter compared to last year's unusually mild winter.
JAPAN OVERCOMMITTED
With robust and reliable supply in Asia-Pacific and healthy stock levels, there is no need for big buyers such as Japan, China and South Korea to import spot cargoes from Atlantic producers unless a protracted cold snap occurs.