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LNG: Market moves to cantago from backwardation; Chinese demand recovering
Mar 06: The website carries here a month-wise forward curve extracted out of different projections for LNG supply, indexed to JCC (at around the price PLL is paying) in comparison to LNG indices such as JKM, NBP Europe and Henry Hub right up to the end of 2021 to show that while LNG prices are expected to climb, the gap with oil indexed prices while narrowing will continue to stay wide enough.
8The forward curve however provides some hope for ONGC and RIL for their KG Basin discoveries, that LNG prices will recover around the time that they are going full steam into production. RIL with a lower cost of production will make money by end of 2021 whereas ONGC may just about breakeven, going by these curves. Going forward, if LNG prices stay up, as they probably will, there will be money to make from the KG Basin.
8The important point to note is that current LNG prices are lower than that of coal, adjusted for efficiency, and policy makers can quickly take advantage of it to fire up India's stalled gas based power capacities. We have  some excellent data to show how this is so.
8The big surprise as of now is that Chinese LNG demand has revived, and it is up to mid-January levels. Overall increased imports are reducing floating storage of LNG.
8The LNG market has meanwhile shifted from backwardation to contango, so this is the best time for Indian purchasers to bring in as much spot LNG as they can.
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