Asian LNG prices gain ground as Qatar diverts supply

Asian spot liquefied natural gas (LNG) prices rose slightly in the past week as the world's biggest producer Qatar diverted prompt cargoes to Europe and some Far East buyers covered short positions. Asian spot prices, which touched $21 per million British thermal units (mmBtu) in early March, fall to year lows of $15.50 per mmBtu last week.
With less LNG available to Asia, at the end of this week prices rebounded slightly to $15.70 per mmBtu for May delivery, traders said. "Prices have fallen a lot over the past month and this steadying could be down to a couple of buyers covering shorts," a trader said.
Thailand closed a buy tender for one cargo loading in May, the trader said, while Australia's North West Shelf recently awarded between 4-5 cargoes to a number of companies, including Britain's BG Group. As the world's biggest and highest-paying LNG market, Asia is a key source of revenue for producers such as Qatar, who have seen earnings fall as spot prices plunged from near-record highs in recent months.
In a trend analysts and traders have pointed to before, Qatar diverts supply en masse away from Asia at times of price falls in order to prevent further losses. It does this even if alternative LNG markets, in this case Europe, provide inadequate economic incentives to warrant diversions from Asia.
Europe's usually threadbare LNG import tally has built up rapidly in recent weeks, with five Qatari tankers due to unload at British and Belgium terminals alone in the next fortnight. Another Qatari cargo is currently unloading at Britain's South Hook terminal. Yet gas prices in Europe are trading at multi-year lows as a combination of high stored reserves, a mild winter and plentiful pipeline supply weighs on sentiment.
Spanish re-exports are continuing at a strong pace with seven scheduled for April. Re-exported cargoes from European terminals have recently formed an important source of spot cargoes for global buyers in South America and Asia. European gas markets have traditionally struggled to compete with Asian markets for LNG volumes as the price of the fuel is higher there, making it a more attractive destination for suppliers.