Feb 16 (Reuters) - Asian spot liquefied natural gas (LNG) prices for April delivery showed a steep discount to March prices but the spread could tighten due to falling U.S. output, low South Korean inventory levels and buyers delaying purchases.
Spot prices for April LNG-AS delivery in Asia were assessed at $7.90 per million British thermal units (mmBtu) this week.
Declining feed-gas supply at Cheniere Energy’s Sabine Pass liquefaction plant in Louisiana may squeeze exports and lift Asian prices if production suffers for an extended period of time.
Some traders linked the cut in gas flows to news earlier this week that federal regulators ordered Cheniere to shut two of the plant’s five storage tanks which leaked the super-cold fuel.
An ongoing investigation was looking into whether the three operating tanks had also leaked. Cheniere did not return requests for comment.
Production from Peru LNG remained offline into its second week but repairs to a burst pipeline feeding the plant were at an “advanced stage” and should resume by the end of this week.
There were also recent reported production glitches affecting Indonesia’s Bontang facility and Qatargas Train 2.
Traders suggested the steep backwardation between March and April may narrow as low stored reserves could force Korea Gas Corp to tap spot markets for additional supply over coming months.
Buyers may also push purchases of LNG from March into April given the savings on offer, further narrowing the price gap.
The Chinese New Year holidays dampened spot market activity with the highlight of the week being the tender awards from Russia’s Sakhalin II plant and purchases by Argentina’s Enarsa, traders said.
Royal Dutch Shell picked up a significant portion of the eight cargoes sold by Sakhalin II over the March 2018-May 2019 period, traders said.
With the exception of China, cold weather prevailed across much of Asia, while areas of the Middle East experienced a hot streak, both supportive of gas demand.
A cold wave was also expected to hit north-west Europe next week.
Kuwait sought a March cargo and Jordan a April delivery.
GAIL India sought two March deliveries.
Angola meanwhile offered one cargo loading in February and another in late March-early April via tender.
Reporting by Oleg Vukmanovic in LONDON, aditional reporting by Jessica Jaganathan in SINGAPORE,; Editing by Jane Merriman