Prompt LNG charter rates west of Suez held on Friday as the prospect of less spot supply because of widespread cancellations of US cargoes weighed on tonnage demand.
Spot charter rates for tri-fuel diesel electric (TFDE) vessels were assessed at $32,000/d on Friday, having held at this level since 11 June. A drop in loadings had reduced spot tonnage demand in recent days compared with previous months, with TFDE rates west of Suez having averaged $35,500/d in May and $43,500/d in April.
Widespread cancellations of US cargoes may continue to weigh on spot tonnage demand in the coming weeks, with the number of cancellations of August-loading cargoes possibly exceeding July numbers, market participant said. Cheniere's customers were required to notify the producer by 20 June whether they intended to lift their August cargoes.
The contango structure in northeast Asian delivered prices may offer an additional incentive for firms to turn down August-loading US cargoes. Firms may not wish to tie up tonnage for August loadings and instead have it available to load cargoes later and delay delivery further into the winter, when higher northeast Asian delivered prices were set to offer better returns, market participants said.
The Argus northeast Asia des (ANEA) November price held a 70¢/mn Btu premium to the ANEA October price on Friday. The differential would be wide enough to cover the additional 60¢/mn Btu cost of storing LNG at sea for 31 days and delivering a cargo to northeast Asia in November instead of October, based on Argus' TFDE laden day-rate forward curve and prevailing delivered prices.
Expectations of stronger demand in northeast Asia this winter had supported fourth-quarter charter rates, with the day-rate forward curve in contango through to the middle of the period on Friday. TFDE charter rates west of Suez were expected to reach a peak of $74,000/d in November.
The prospect of less spot supply as a result of widespread cancellations of US cargoes had weighed on charter rates in recent weeks. Some US offtakers were heard to have cancelled up to 25 June-loading cargoes across US export facilities and the total number of July cancellations was heard possibly up to 40 cargoes.
The Argus Gulf Coast fob (AGC) August price fell to $1.80/mn Btu on Friday from $1.85/mn Btu at the previous close and narrowed its premium to the Henry Hub to 7¢/mn Btu from 12¢/mn Btu. The AGC-Henry Hub differential would not be sufficient to cover the 15pc premium to the Henry Hub that long-term offtakers pay for feedgas under contracts with Cheniere, suggesting firms that had not hedged their volumes in advance will likely opt to cancel their August volumes.
The AGC-Henry Hub August differential may also not be sufficient to cover feedgas costs for Cheniere itself, suggesting the firm was unlikely to remarket any cancelled cargoes.
