Last week the European LNG price premium died as spot prices for LNG in Asia driven by Japanese demand rose to below USD 8 per MMbtu but the price is not attractive to pull LNG cargoes away from Europe given the freight and lack-luster demand in Asia. LNG cargoes will then continue to be dumped in the Atlantic basin seeking markets in Europe and Brazil. Brazil’s acute drought has crippled the capacity of its hydro-electric plants causing shortfalls in the supply of electricity to its major urban conclaves: Sao Paulo and Rio de Janiero. The question then is the level of demand in Europe and the demand capacity to absorb the volume of product on offer. Then the slide of the value of the Euro to the USD, yesterday it closed on Wall St at 1.06 USD to 1 Euro, is raising the real cost of imported LNG to consumers. Chevron has announced that LNG from the first train of its huge Gorgon LNG project in Australia will be exported in the final quarter of 2015 raising further the supply of Asian produced LNG to Asia. Finally the successive cold waves that brought below freezing temperature to the US North-East thereby raising the cost of imported LNG to USD 14 MMbtu and above is about over and as a result no more laden LNG carriers are presently heading for the US North-East or Repsol’s Canaport in Canada. I daresay T&T LNG was in this flow that is now dead. In the face of this perfect storm T&T is faced with an explosion of demand for US currency which has nothing to do with the level of demand in the economy. The largest single retailer of consumer durables in T&T has following the Christmas 2014 reality is reported to have laid off 200 workers/contractors with a further 150 to go and closed a series of sales outlets of one of its brand stores, major contraction to match the level of demand from its client base. Where then is the level of demand to justify an explosion of demand for hard currency? The rate of demand is outstripping supply and this has led to the fall in the level of hard currency savings held by the Central bank for the people of T&T not the politicians of T&T. The perfect storm has hit T&T and are we to expect a rapid depletion of our foreign reserves for the sake of political expediency. If demand outstrips supply why no depreciation of the TT dollar vs the US dollar? Why is the TT dollar appreciating? Clearly a political solution to market realities. Note carefully the LNG markets have changed structurally because of a new paradigm this is no short term dislocation. I have stated it before in a previous post that the new paradigm in the Caribbean illicit trades is also pushing the run on our hard currency reserves as the supply side of the market tightens under the Mexican cartel monopoly. The DR has also a similar run on its hand and its Central bank has intervened via repeat sales of USDs to defend its currency.
March 16, 2015: For the week ending 13 March the Asian spot market price remained unchanged at USD 7.75 per MMbtu with May delivery in the low USD 7s. End users are “mostly well stocked” and there is no rush to buy as traders set their gaze on April market demand. Argentina’s YPF finally came into the market with tenders for 11 LNG cargoes: six full loads and five partial loads for its first purchase since September 2014. Such is the nature of spot demand in this month. LNG prices in Asia are expected to fall when in 2015 some 32 million tonnes of LNG capacity come on stream in Australia. The perfect storm intensifies battering T&T’s revenue base in the land of acute denial and political power possession for the sake of personal aggrandisement.