Asia LNG price spike opens arbitrage to West to replace Qatari LNG supply
Analysts said that Asia's liquefied gas prices have risen, creating arbitrage opportunities for traders who want to ship cargoes to the east from the Atlantic in order to replace the Qatari supply which was lost during the U.S. - Iran?war.
As the Middle East conflict reduces shipments, and Qatar's output is halted, cargo diverts could increase competition between the Atlantic basin and the Pacific basin.
According to Kpler's data, Asian buyers account for more than 80% of Qatar's LNG sales.
In a note published on Tuesday, Spark Commodities analyst Qasim Afghanistan said that "Global arbs for the front month have significantly increased and are now available to Asia in several major export destinations."
He added that the U.S. arb front month has increased to favor Asia deliveries, and the Norwegian arb for Asia has opened up again, the first since 2023.
Since Friday, the JKM-TTF spread has increased from $5.10 per mmBtu to +$5.00.
The JKM is the main benchmark for LNG spot cargoes in Asia, while the Dutch Title Transfer Facility is Europe's gas benchmark.
ASIA AND NW EUROPE PRICES JUMP
Platts' benchmark Japan-Korea-LNG marker (JKM), which is used to determine the price of LNG for delivery in April, rose by 68.52% on Tuesday. This was the highest level seen in the past three years.
Henry added that spot LNG delivered to Northwest Europe in April for delivery rose by 57% or $5.60 to $15.479 per milliBtu on March 2, the biggest daily gain since 2022.
TotalEnergies sold one LNG cargo at $24.15/mmBtu to Glencore on Tuesday for delivery between April 8-10. The base discharge port was PipeChina Tianjin in China.
CARGO DIVERSION IN NIGERIAN
After spot prices rose, one LNG tanker which was originally bound for the Atlantic has been diverted to Asia.
Kpler data showed that the BW Brussels LNG tanker had loaded a cargo from Bonny LNG, Nigeria, on February 27, and was heading west. On March 3, it turned south.
Go 'Katayama is a principal insight analyst with Kpler. He said that BW Brussels appears to have changed its course and now heads toward Asia via Cape of Good Hope.
This likely reflects the growing Atlantic-Pacific arbitrage. Stronger Asian pricing makes diverting cargoes with flexible destinations to the Atlantic more attractive. If the spread persists we may see more "similar diversions."
Search for Alternatives
A government source revealed that India is looking for other sources of LNG to replace the Qatari supply.
An official from state-run Petrobangla has said that Bangladesh will issue two tenders to procure LNG cargoes as soon as possible.
Ross Wyeno is the associate director of S&P Global Energy's lead LNG short-term analysis.
However, the deep liquidity on TTF's financial markets could provide a strong motivation to keep many Atlantic Basin flexible cargoes pointing towards Europe.
(source: Reuters)
