Singapore - Record low prices for liquefied natural gas (LNG) are roiling the global gas market, creating havoc as traders rush to find alternative locations for cargoes with Chinese buyers rejecting shipments amid the coronavirus epidemic.
Asian spot prices for LNG LNG-AS have already tumbled to troughs of $3 per million British thermal units (mmBtu) - less than half of what they were at the same time last year.
At least one cargo bound for India has already traded below $3/mmBtu, down 30 cents within a week, traders said.
Concerns that Chinese companies could back out of contracts because of the impact of the coronavirus outbreak have slowed oil and gas sales into China. Reuters reported on Thursday that China’s top LNG buyer China National Offshore Oil Corporation (CNOOC) declared force majeure on some prompt LNG deliveries with several suppliers.
Energy ship broker and consultancy firm Poten & Partners said on Friday at least five LNG cargoes had been diverted from China, and another 30 due to land there this month could face diversions, delays or force majeure declarations.
“Prices are free-falling just within this week,” a Singapore-based LNG trader told Reuters. “This kind of force majeure situation is unprecedented and has never happened before so it’s big news.”
In one example of the turmoil in the market, an executive from French oil major Total said it had rejected a force majeure notice from an LNG buyer in China, without identifying the company.
At least one cargo bound for China, the world’s second-largest LNG importer, has diverted and is heading towards Singapore storage tanks, several sources told Reuters. Three other vessels bound for China have reduced speed, one of them said.
At least two major suppliers to CNOOC told Reuters that the firm had requested that its cargo deliveries be delayed. A CNOOC executive declined to comment.
Consultancy Rystad Energy on Friday cut its forecast for Chinese LNG demand growth this year to 4.7%, from a year on year gain of between 10% and 13%.