Global LNG-Asian LNG prices near $16/mmBtu

PERTH/LONDON, March 23 Fri Mar 23, 2012 10:57am EDT

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PERTH/LONDON, March 23 (Reuters) - Asian LNG prices for April rose closer to $16 per million British thermal units (mmBtu) this week, with cargoes delivering in May already priced above that level as customers stocked up on summer supplies.

Last week, Asian prices were around $15.70 to $15.80 per mmBtu.

The world's top LNG buyer, Japan, is headed into summer with just two of its 54 nuclear reactors online as public safety concerns, following the March 2011 tsunami that triggered a nuclear crisis, have kept reactors that were shut for maintenance out of commission.

Japan's eagerly-awaited decision on whether to restart its nuclear fleet that previously produced nearly a third of the country's electricity is set to underpin domestic demand for LNG as well as influence the direction of global gas prices.

A vote in favour of averting potential power shortages by restarting lost output of atomic plants will erode demand for substitute fuels such as LNG, potentially weakening prices worldwide and releasing more supply to markets outside Japan.

A shift away from nuclear will drive demand for seaborne gas deliveries and probably necessitate the build out of Japan's gas-fired power industry, guaranteeing medium-term growth in gas demand on top of recent boosts, according to trade sources.

In the absence of a decision, however, some buyers are wary of committing themselves to paying for cargoes that may not be needed if the government decides to restart reactors, a trade source said.

"Japanese buyers are only covering short-term demand as they await the big political decision on nuclear...the spot market there is a lot quieter than it has been," he said.

A European LNG producer disagreed with that analysis, pointing to record import demand into Japan and high utilisation of gas-fired power plants as LNG is comparatively cheaper than some alternative power plant fuels, such as fuel oil.

"We also see a lot of re-load interest in the Atlantic Basin on typically 10 percent of Brent crude price, or JCC level (the Japanese Crude Cocktail), which if you ask me indicates healthy demand in the Far East," he said.

LNG in Asia is typically linked to the price of crude oil, or a basket of crude oil grades, including the JCC.

In Europe, only Spain, Italy, Turkey and Greece showed any demand for spot LNG cargoes. "And the only demand from Spain is related to re-exporting cargoes to other markets, mostly in Asia," the producer said. (Reporting by Oleg Vukmanovic; Editing by Anthony Barker)

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