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Prices firm as fundamentals tighten

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LNG Industry,

Reuters are reporting that Asian spot prices for LNG firmed over the past week, supported by strong oil and coal markets and amid a structural tightening of the fuel’s fundamentals.

Asian LNG prices for delivery in June LNG-AS were at US$8.1 per mmBtu, up 15 cents from last week’s value and more than 15% above a seasonal low from early April.

Traders said prices remained firm despite LNG markets being in the midst of the northern hemisphere’s low-demand spring season, during which little gas is used.

“LNG prices are being supported by external factors, namely oil and coal,” said one Singapore-based trader.

Crude oil prices, to which gas markets are closely linked, are near three-year highs on expectations that the United States will re-introduce sanctions on major exporter Iran.

Asian benchmark thermal coal prices are at their highest seasonal level in more than five years at over US$100 per t, driven by unexpectedly strong demand.

Coal and gas markets are linked as they are the main fossil fuel competitors in power generation.

Overall, the LNG market in Asia has tightened over the past year, with the winter seasonal demand peak (December/January) and spring low (April/May) seeing significantly higher prices in 2017/2018 than in 2016/2017.

Booming demand for LNG is also visible in the shipping sector, where hundreds of new LNG tankers are being built.

“Over the 2018 – 2022 period, 265 LNG carriers are expected to be delivered, as record numbers of carriers will be required to meet the increased LNG output expected by the end of the forecast period,” said energy consultancy Westwood.

In physical markets, Taiwan’s state utility CPC bought LNG for June via a tender for about US$8.30 per mmBtu, traders said.

South Korea’s SK Energy is seeking a cargo for early June and July delivery, while India’s Gail awarded 12 LNG cargoes to Dominion Energy’s Cove Point LNG export facility in the US this week.

Cove point started exports in March and is the second US LNG export facility after Cheniere’s Sabine Pass in Louisiana.

In Africa, Cameroon is preparing its first LNG cargo from the Golar LNG-built Hilli Episeyo Floating LNG facility, with the Galicia Spirit tanker due to load.

Angola also issued an LNG export tender this week.

In the Caribbean, Trinidad & Tobago issued a tender for cargo loading on 8 June, traders said.

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