OPEC’s recent announcement it would cut crude oil production has boosted Asian spot LNG prices to their highest this year so far.
Spot prices for Asian LNG increased 30 cents from last week to around $7.40 per million British thermal units (mmBtu), Reuters reported on Friday citing trade sources.
Driving the price up was the agreement reached between OPEC and Russia to cut the output in order to tackle the oversupply that put pressure on the market for over two years.
Following the deal, oil prices jumped over 10 percent, reaching $53 per barrel.
The rise had an effect on Asian spot LNG prices that hit the highest level since November 2015. The report notes that 80 percent of Asian LNG supply contracts are linked to the price of crude and the cost of shipping has also been a contributor to the rise of the spot LNG price.
However, the cut in crude output could have another effect on the spot market as the price difference between oil linked contracts and spot cargoes could increase significantly.
Reuters cited Wood Mackenzie’s analyst Chong Zhi Xin as saying that the buyers could start opting for spot cargoes instead of their long-term contracted supplies.
The cold weather is also playing a significant role in the spot LNG price jump since it is expected that Asian utilities start purchasing cargoes from the spot market in order to meet the winter demand.(source: LNG World News Staff)