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Asian spot LNG prices shrug off months of weakness

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Reuters are reporting that Asian spot LNG prices stepped higher last week, shrugging off months of weakness, as Royal Dutch Shell replaced lost output from its Peru plant via spot markets and as a flurry of higher-priced deals surprised traders.

Peru's liquefaction plant suspended loadings for several weeks without explanation, exerting strain on Shell, which is the sole exporter of Peruvian LNG and was forced to pick up replacement supply on spot markets.

The company bought a Nigerian free-on-board cargo loading 29-30 July at an estimated price of US$4.80 – 4.90/mmBtu, considered high after adding shipping costs.

An expected increase in supply is likely to limit recent gains, however, and pull back prices. Australia's new 8.9 million tpy Wheatstone LNG plant is due to start operations in August and the fourth production line at Cheniere Energy's Sabine Pass facility in Louisiana is also nearing start-up.

Spot prices for Asian LNG for September were at US$5.65/mmBtu. Last week the August spot contract traded at US$5.50/mmBtu.

Malaysia's Bintulu production plant awarded to an undisclosed buyer a closed tender for a cargo loading in late August at US$5.75/mmBtu.

Dealers in Asia expressed surprise at the recent strength in spot prices.

A sell tender from Indonesia's Donggi-Senoro plant for an early-September cargo to the Far East was awarded for approximately US$5.60/mmBtu.

A number of Japanese buyers helped to buoy demand. But the status of Kansai Electric's tender to buy a cargo for delivery between 25 August and 5 September, which closed on 18 July, is unclear. The tender might have drawn unattractively high offers, prompting Kansai to rethink.

Peer Tohoku Electric has quietly tendered for a spot cargo delivering 18 – 30 September.

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