Global LNG-Summer demand continues to push Asian LNG prices higher

Fri May 27, 2011 6:37am EDT

* Warm summer in Japan could boost demand

* Lack of shipping vessels limits LNG trade

By Rebekah Kebede and Edward Mcallister

PERTH/NEW YORK, May 27 (Reuters) - Asian spot prices for liquefied natural gas (LNG) rose to around $13.50 per million British thermal units (mmBtu) as demand picks up ahead of summer, but trade was limited by a lack of ships to transport the fuel.

"Asia is still seeing demand for cargoes although prices are holding more steady," ICAP analysts said in a note.

Summer demand for LNG could strengthen if summer weather in Japan, the world's largest importer of the fuel, is warmer than normal.

Eastern Japan, including the densely populated Tokyo area, has a 40 percent chance of average temperatures and the same probability of higher-than-average temperatures during the summer months. [ID:nT9E7GB03X]

The market is also still eyeing Japanese demand for cargoes to replace nuclear power taken offline since the earthquake and tsunami in March.

One utility, Chubu Electric Power Co , said that it had secured half its additional LNG needs for the year to March 2012, mainly from Qatar, but was still trying to secure part of the extra 3.2 million tonnes of LNG it needed to make up for shutting its Hamaoka nuclear plant. [ID:nL3E7GN12A]

Japan's LNG imports totalled 6.009 million tonnes last month, up 8.8 percent from a year earlier, but down from a spurt in March following the quake. [ID:nL3E7GP0CG]

With Japanese demand still strong, supplies on the spot market were thin.

"Supply generally also seems to be tight in the sense that those that have supply seem to be reluctant to just trade it out... they want to go and sell directly to buyers" one Singapore-based market source said.

TANKERS AT $150,000 PER DAY?

With Asian prices higher, Atlantic Basin producers are keen to make the most of the spread, but tight shipping is hampering long-haul deals to Asia-Pacific buyers.

The spread between Asia LNG-AS and benchmark British gas prices was more than $4 per mmBtu, in line with last week and still offering the potential for diversions from the Atlantic Basin to the Pacific. Two weeks ago, the spread was $3.     LNG charter rates are now being discussed above $100,000 a day, up from about $90,000 in April -- and soaring above 2009 levels near $30,000 a day -- as traders scramble to find an elusive spare tanker.

"It's good if you happen to have supply and you happen to have a ship," said the Singapore market source, who had passed up on tender opportunities because of the lack of shipping availability.     The head of Sweden's Stena Bulk, which recently bought three LNG tankers, reckons deals will soon be done for as much as $150,000 a day. He has already turned down offers for more than $100,000 a day, he told Reuters earlier this week. [ID:nN25262064]     Low gas prices in the United States due to ample supply continue to deter shippers from sending spot cargoes to U.S. terminals.      While the spread between U.S. and British gas prices <0#NG-NGLNM=R> -- which helps determine the flow of Atlantic Basin LNG -- has narrowed after spiking to about $6.50 after Japan's nuclear disaster, the British premium of more than $5 is enough to keep cargoes away from U.S. shores.

For a table showing LNG tankers heading to Northwest Europe, click here:

For tankers heading to the US, click here: (Editing by David Fogarty)

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