Wednesday, February 26, 2020

LNG Prices Nosedive

April 21, 2019

Graph: Rystad Energy

A mild winter and growing surplus of supply have knocked the legs out from under Asian LNG, with spot prices plummeting more than 60% since last September, Rystad Energy, energy research and business intelligence company.

Similarly, British front month prices (NBP) have dropped from $9.90 per MMBtu in September 2018 to $4.40 per MMBtu during the first week of April.

Current low prices at importing markets offer producers in the main exporting countries – Australia, Qatar and the US – meagre netbacks of below $4 per MMBtu.

This basement price no longer allows all exporters to cover their operational costs, which could have serious implications; exporters could adjust down production to avoid operating at a loss if low prices persist.

Some Australian spot cargoes are already in the red as netbacks are more than $1 per MMBtu below opex.

However, given that the US and Qatar have lower feed gas costs, exporters from these countries are still achieving a profit when selling volumes in the spot market.

Even if European prices were to fall to $3.90 per MMBtu, representing a drop of about $0.50, US exporters would still break even, assuming Henry Hub prices remain at $2.70 per MMBtu. And in Qatar, Asian spot prices could fall another $1.90 per MMbtu before falling below the breakeven price.

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