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Record low LNG spot prices attract bargain hunters

By Jessica Jaganathan

By Jessica Jaganathan

SINGAPORE (Reuters) - Record low spot prices for liquefied natural gas (LNG) are attracting buying interest from companies in Asia hunting a bargain after China's top buyer of the fuel declared force majeure last week, four trade sources said on Monday.

Sellers, however, are wary because of an array of operational issues, the sources said, speaking on condition of anonymity.

Asian spot LNG prices touched a record low this month following reports China's top LNG buyer China National Offshore Oil Corporation (CNOOC) had declared force majeure on some prompt LNG deliveries.

Companies have been seeking to invoke force majeure, a legal provision that allows them to break contractual obligations because of circumstances beyond their control. The drop in demand following the coronavirus outbreak has added to oversupply caused by mild weather.

On Monday, price agency S&P Global Platts' assessment process, which it calls market-on-close, attracted five bids, one of the highest numbers in recent months, industry sources said.

Three of the bids were placed by commodity trader Vitol while the other two were by Trafigura and BP, according to Platts.

But despite record low prices of below $3 per million British thermal units (mmBtu), there was little selling interest, traders said.

"There are so many operational issues, sellers are also wary," a Singapore-based LNG trader said.

Energy ship broker and consultancy firm Poten & Partners said on Friday at least five LNG cargoes had been diverted from China, and another 30 scheduled to land there this month could face diversions, delays or declarations of force majeure.

Several Asian buyers also entered the spot market, traders said.

Japan's Chugoku Electric bought a cargo for delivery into Mizhshima or Yanai in first half of April at below $2.90 per mmBtu, two sources said.

South Korea's steelmaking company POSCO and GS Caltex jointly bought a cargo for delivery in second half of March at about $2.80 per mmBtu, the sources added.

Both deals could not immediately be confirmed and companies typically do not comment on trades, citing confidentiality obligations.

Indian Oil Company (IOC) also entered the market to seek a cargo for delivery over March to April through a tender, the sources added.

(Reporting by Jessica Jaganathan; editing by Barbara Lewis)