By BloombergNEF and Bloomberg Intelligence
By Maggie Kuang, BloombergNEF
The average price of November Japan-Korea Marker futures, an indicator of spot LNG prices in Asia, surged to $6.5 per Million British thermal units on Sept. 17, the highest in the past seven months. This follows rising concerns about potential conflicts in the Strait of Hormuz due to the drone attack on Saudi Arabian oil facilities on Sept. 14.
BloombergNEF expects the impact of the market sentiment on the spot LNG prices to be short-lived due to strong supply fundamentals in the rest of 2019. The temporary surge reflects market players' push for price adjustment between contracted and spot LNG. The price of LNG in oil-indexed long-term contracts would have increased due to soaring oil prices caused by the oil supply disruption from Saudi Aramco's fields.
LNG and gas price benchmarks
By Talon Custer and Fernando Valle, Bloomberg Intelligence
The attack on Saudi Arabian oil facilities raises concerns about potential conflict in the Strait of Hormuz and highlights the need for more supply diversity, in our view, given Qatar is the largest exporter. We expect geopolitical risk to continue supporting near-term LNG pricing, but Middle East tension could threaten Qatargas's ambitious LNG expansion plans.
LNG spot prices boosted by Qatar export concerns
Threat of further acts of aggression or military escalation in the Straight of Hormuz, a major oil and LNG chokepoint, have raised concerns about Qatari LNG exports and caused a surge in liquefied natural gas spot prices. The benchmark Singapore SLInG LNG spot price index jumped 21% vs. last week to $5.64 per million BTUs, opening inter-basin arbitrage opportunities that should drive Asian demand for more U.S. LNG cargoes, in our view.
Increased spot pricing should bode well for LNG exporters such as Cheniere, as well as LNG carrier operators including GasLog, Golar, FLEX and Teekay. Qatar Gas Transport (Nakilat) could benefit from higher spot rates, but the risk from rising Middle East tension could outweigh benefits.
Benchmark gas, spot LNG pricing ($/MMBtu)
Tensions highlight need for LNG supply diversity
Heightened risk surrounding the Strait of Hormuz stemming from attacks on Saudi Arabia oil infrastructure could boost LNG demand from nations such as the U.S., Australia and Russia and drive importers with elevated exposure to Qatar -- the largest LNG exporter -- to reevaluate portfolios and pursue further diversification. We believe recent events could also threaten Qatargas's plans to boost LNG export capacity by 43% to 110 million tons a year by 2024.
Qatar comprises a sizable amount of year-to-date LNG imports in countries such as India (41%), South Korea (31%), Belgium (67%) and Italy (48%), based on Poten & Partners data. Qatar makes up a smaller percentage of LNG imports in Japan (11%) and China (14%).
Qatari LNG exports to select countries (Bcm)
