U.S. LNG Imports May Rise on Higher Prices, Lower Inventories
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By Dinakar Sethuraman
Feb. 26 (Bloomberg) -- The U.S. may secure higher supplies of liquefied natural gas in March as prices catch up with Europe, investment bank Tudor, Pickering, Holt & Co. said.
The benchmark at Henry Hub, Louisiana, was 75 cents a million cubic feet below prices in the U.K. last week, compared with a year-to-date discount of $2.20 as of Feb. 19, Tudor analyst Stacy Nieuwoudt said in an e-mail today. The spread, equal to about 73 cents per million British thermal units, is at its narrowest since September.
``The U.S. versus U.K. arbitrage held flat over the last week,'' Nieuwoudt said. ``With the recent spike in U.S. gas prices, this could entice more cargoes.''
Natural gas in the U.S. has gained because of reduced stockpiles and colder temperatures, while prices in Europe have eased this quarter as the weather turned warmer. Suppliers had rerouted cargoes since November from the U.S. because utilities in Europe and Asia paid as much as $20 per million Btu, more than double the U.S. benchmark.
The U.S. may receive as much as 1.5 billion cubic feet a day of LNG next month, based on shipping schedules and commissioning of the Sabine Pass, Texas and Northeast Gateway terminals, according to Nieuwoudt. BG Group Plc and BP Plc supply a majority of U.S. LNG.
LNG supplies to the U.S. declined to 800 million cubic feet a day this month from 1.5 billion cubic feet a day a year ago, Nieuwoudt said. The country purchased 2.1 billion cubic feet a day of LNG in 2007, up from 1.6 billion cubic feet a day a year earlier.
Gas Gains
Natural gas has risen 22 percent this year on the New York Mercantile Exchange, to $9.178 per million Btu units at 1:32 a.m. New York time. Futures yesterday climbed as high as $9.36, the highest since Feb. 1, 2006. U.K. natural gas for same-day delivery rose to 52.50 pence a therm as of 5:02 p.m. London time yesterday, according to prices from the broker ICAP Plc on Bloomberg. That's equivalent to $10.33 a million Btu.
Goldman Sachs Group Inc. analyst Brian Singer raised his 2008 forecast for Henry Hub gas prices to $9.75 per million Btu from $8.50 and lifted his 2009 outlook to $10.50 from $10. U.S. gas markets will be under-supplied this spring unless prices increase enough to stimulate production, he said on Feb. 25.
U.S. Terminals
U.S. terminals are offering LNG sellers an average of $6.88 per million British thermal units as netbacks, the price derived after deducting transportation and insurance, LNG Intelligence, a trade daily, said today. The U.K. netback at the Grain terminal was $7.82.
U.S. gas stocks may end the winter demand season about 200 billion cubic feet below the year-earlier amount of 1.569 trillion, Mike Dane, an analyst at SunTrust Robinson Humphrey in Houston, said on Feb. 25.
LNG is natural gas that has been chilled to liquid form, reducing it to one-six-hundredth of its original volume at minus 161 degrees Celsius (minus 259 Fahrenheit), for transportation by ship to destinations not connected by pipeline. On arrival, it's turned back into gas for distribution to power plants, factories and households.
To contact the reporter on this story: Dinakar Sethuraman in Singapore at dinakar@bloomberg.net
Last Updated: February 26, 2008 02:01 EST |
