21 Dec 2017, 3.23 pm GMT
London, 7 December (Argus) — Northeast Asian delivered LNG prices have climbed to their highest since early January 2015, but remain below the cost of oil.
The ANEA — Argus assessment of delivered cargoes to northeast Asia — front half-month market closed at $10.13/mn Btu today, up every session since the $9.645/mn Btu on 22 November. But an increase in oil prices this winter compared with the past two years has raised a potential price ceiling for global LNG markets.
When the global LNG supply-demand balance has been tightest, the ANEA front half-month market has peaked just above prices that would be at parity with oil, when measured in energy units. Last winter's high was $9.90/mn Btu on 3 January, when North Sea dated was at $54.78/bl — equivalent to $9.96/mn Btu.
And the ANEA front-half month price briefly went to a premium to North Sea dated in February 2016, but this was short lived and prices were still below $6/mn Btu with oil prices close to $30/bl at the time.
Firms can switch to oil from gas when LNG becomes the more expensive feedstock. This can result in demand easing when LNG prices hit parity with crude in energy terms, preventing further gains and resulting in a soft ceiling for LNG markets.
But North Sea Dated has climbed from its low in January 2016, and there has been a steady rise since late June. It closed at $11.28/mn Btu yesterday, up from an average of $9.37/mn Btu last winter. And the $11.73/mn Btu on 1 December was the highest since May 2015.
This could provide some flexibility for ANEA prices for delivery over the rest of the winter to rise, if they are to hit oil parity as they have done in the past four heating seasons.
Strong Indian LNG demand and brisk Chinese receipts have supported global LNG prices.
And strong consumption in southern Europe, particularly from Spain and France's TRS market area, have also lifted LNG demand.
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