Traders expect imminent 'massive' LNG imports from the Middle East

Traders expect imminent 'massive' LNG imports from the Middle East

The Middle East is likely to see a large LNG tender in the near term, given the historical buying patterns in the region, according to market participants polled by S&P Global Platts this week. As S&P Global Platts writes, last year, LNG imports into Jordan, Kuwait and the UAE received 19 cargoes, or 1.6 Bcm of natural gas equivalent in the first quarter. This compares with 4 cargoes or 399 million cu m this year over the same period. "We have not seen the usual counter-seasonal buyers yet," said a trader.

"I think the Middle East will simply appear with a massive tender soon, and keep a handful of spot Qatari cargoes to themselves [instead of going to Asia]," he added. During summer, demand in the region is much higher than in the rest of the year due to the air conditioning utilization. "Given historical buying patterns, this tender will almost surely be won by Qatar regardless of current geopolitical tensions, which have not changed Kuwait, Oman and the UAE's buying patterns from Qatar," Platts Analytics said.

LIMITED IMPACT ON PRICE

Participants agreed that while the demand in the region should pick up significantly, prices in Europe and Asia might not be impacted much. "While that is a significant amount of gas for Qatar to keep in the region, it is not enough to add massive upside to Platts JKM Asian benchmark, especially given the large supply growth we have seen since this time last year (about 60 million cu m/day) and the weaker-than-average Asian demand at the moment," Platts Analytics said. In addition, Qatar's exports to Egypt have been suppressed since last October, as the Egyptian government halted imports on the back of growing domestic production from the Zohr field. This in turn will dampen the effect of Kuwaiti demand, Platts Analytics said.

Egyptian imports averaged 15 million cu m/day over the second and third quarters in 2018, and 40 million cu m/day in Q2 and Q3 in 2017, according to Platts Analytics data. One market participant said the expected tender might have already been priced in, with the JKM returning at premium to the Dutch TTF gas hub recently. "It is not [about] the tenders that are coming in, but ones that are not coming in," the trader said. The JKM spot has been at an unusual discount to TTF since March 20, but rebounded to a premium on April 9. The spread was assessed by Platts at $0.582/MMBtu on Thursday at close. "The magnitude of the tender would have to really catch people by surprise to make a substantial impact on European prices (currently)," said another trader.

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