Rising oil and tight supply lift Asian spot LNG market

An oilfield in Saudi Arabia. Hedge funds raised their Brent net-long position to a record 543,069 contracts in the week ended November 7. Brent net-long position — the difference between bets on a price increase and wagers on a drop — by 2.4 per cent to a record 543,069 contracts in the week ended November 7, according to data from ICE Futures Europe. Longs surged by 2 per cent to an all-time high, while shorts tumbled 2 per cent to the lowest in more than eight months.

Bullish attitude

The record positioning “is not surprising because when you think about it, nothing has changed either fundamentally or sentiment-wise to take away this bullish attitude,” Ashley Petersen, lead oil analyst at Stratas Advisors in New York, said in a telephone interview. “I wouldn’t be surprised to continue seeing this kind of movement as long as we’re not getting any negative news from the Opec members until the meeting.”

While Opec’s Secretay-General Mohammad Barkindo said he sees no opposition to the group prolonging production cuts, Citigroup Inc. warned bulls they may be disappointed.

Should any potential outcome from a November 30 meeting not satisfy investors, that could lead to a reversal in positioning, Essner said. “Disappointment could be defined as Opec did exactly what they telegraphed they were going to do, but nothing more.”

Asian spot liquefied natural gas (LNG) prices rose last week on already tight supply and production outages in Australia and was further buoyed by climbing crude oil prices. Spot prices for December delivery rose to $9.45 per million British thermal units (mmBtu), 30 cents above last week’s levels.

Australia’s North West Shelf export facility suffered a partial outage on Friday morning after several production units were taken offline, though at least one is in the process of restarting, sources said. One trade source said three of five production units, or trains, may have been affected, but immediate confirmation was not possible.

The plant can produce 16.3 million tonnes of LNG a year but the duration of the shutdown remains uncertain, making it difficult to gauge its impact on prices.

Egypt’s latest 12-cargo LNG buy tender drew some relatively high oil-indexed bids for January and February.

Spain’s Gas Natural Fenosa (GNF) won five cargoes after submitting highly competitive bids relative to Trafigura, Vitol and Glencore — which also scored shipments, traders said.

Tender cargoes

GNF submitted a bid, expressed as a percentage of Brent, of around 13 per cent for March shipments at a time when Brent was trading at $59 a barrel, a trader said. Brent is currently trading at $64.10 a barrel. Mexico’s state-run power utility CFE also sought via tender cargoes at the end of November and the end of December, trade sources said.

Russia’s new Yamal LNG export plant is due to begin loading its first cargo in November, according to a presentation by shipping company Teekay.