Fundamentals

Published at 12:16 31 May 2017 by . Last edited 11:17 22 Aug 2019.

LNG import volumes remained strong last month across the key importing countries. China, South Korea and even Japan imported more LNG than last year as some lingering winter cold and LNG prices between 5 and 6 $/mmbtu supported takes. Indian LNG demand also remained supported thanks to lower prices, while demand growth in the MENA region has begun to slow.

Chinese LNG demand remained strong in April, with imports rising by 0.28 Mt y/y to 2.17 Mt, which is 15% higher y/y. The growth was driven primarily by stronger imports from Qatar and Malaysia, as Australian volumes unexpectedly fell y/y, for the first time since May 2015, by 6% to 1.0 Mt. Given the month-long outage at Gorgon Train 1 that started on 12 May, volumes from Australia could be affected this month as well, although most of the impact should be felt in June given sailing times between northern Australia and China. After a strong start to the year for LNG volumes, largely driven by a preference for the liquefied fuel over pipeline imports, we have left our forecasts for Chinese LNG imports unchanged, with 2017 growth at 4.5 Mt y/y.

Indian demand also remained strong in April, with imports reaching 1.65 Mt, up by 2% y/y on an already high April 2016 base and just a touch below September 2016’s record high of 1.74 Mt. LNG prices for April delivery at 5.30 $/mmbtu were marginally higher than prices in Northeast Asia and Europe but still at levels that can price into the Indian energy mix.

In Japan, LNG imports rose by 3% (0.19 Mt) y/y to 6.57 Mt in April, driven by colder weather than last year. Japan experienced 12% more HDDs y/y, though some of the rise was due to base effects, as April 2016 was especially warm. On 24 April, the Governor of Saga Prefecture approved the restart of Kyushu Electric’s Genkai reactors, which could now come back online as early as this summer according to some reports. Kyushu Electric initially won permission from the Mayor of Genkai to restart the units in February. The outlook for 2017 is slightly more bearish on this news, and we forecast a 1.2 Mt y/y decline this year.

South Korean LNG imports were up y/y by 0.16 Mt at 2.34 Mt last month, leading to a net stockbuild of 0.21 Mt and taking implied LNG stocks to roughly 2.16 Mt. While imports where higher compared to April 2016, the y/y increase has shrunk considerably over the last two months compared to the 2016-17 winter, when it was as high as 0.83 Mt in January.

Total Latin American LNG imports rebounded y/y in April, growing by 0.18 Mt to 1.46 Mt. Chile took 0.25 Mt (133%) more y/y at 0.43 Mt, Argentina imported 15% (0.02 Mt) more LNG y/y, and Mexican LNG imports increased by 0.06 Mt y/y to 0.42 Mt. In contrast, Brazilian imports remained very weak and fell by a heavy 57% y/y in April.

LNG imports into the MENA region rose m/m to 1.2 Mt and returned to y/y growth, although by just 0.06 Mt as demand growth continues to ease. Indeed, over the first four months of 2017, imports are up y/y by just 0.33 Mt, compared to growth of 2.43 Mt over the same period last year. While MENA demand tends to be strongest during the summer, the deceleration of demand growth is reflective of a structural change in a region that has been the source of significant incremental demand since 2015.

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