Page 6 - NorthAmOil Week 47

NorthAmOil COMMENTARY NorthAmOil
Market oversupply causes Pavilion to cancel cargo
Oversupply in the global market has led Singapore’s Pavilion Energy to cancel the loading of a US LNG cargo, and more traders may consider making such moves against a backdrop of full inventories and mild weather forecasts
GLOBAL
WHAT:
Pavilion Energy has cancelled the loading of a cargo from Cameron LNG, but will still reportedly pay for it.
WHY:
An oversupplied market is leaving traders unable to resell purchased cargoes.
WHAT NEXT:
Current market pressures will likely spur buyers
to push for even more flexibility in how they purchase LNG.
THE flood of new supply onto global markets amid slowing demand is increasingly weighing on the LNG industry. On November 19 Reuters reported that Singapore’s Pavilion Energy had cancelled the loading of an LNG cargo from the Cameron LNG terminal in Louisiana, on the US Gulf Coast. The move is an unusual one, having come about in an oversupplied market in which traders are finding themselves unable to resell cargoes they have purchased.
Gas importer and marketer Pavilion has a long-term supply agreement with Japan’s Mit- subishi to buy LNG from the Cameron facility, which is operated by Sempra Energy. Industry sources told Reuters that Pavilion had still agreed to pay for the cargo that it declined to load.
“Pavilion Energy evaluated scheduling and other commercial matters, then took the deci- sion not to lift the cargo in full co-ordination with the supplier,” a Pavilion spokeswoman told Reuters.
And the news service cited traders as saying that other buyers of US LNG are also considering
not loading their cargoes while still paying for them, those these reports remain unconfirmed as yet. However, for those buyers with take-or- pay agreements in place, this may end up being the best option during a period of market over- supply and low LNG prices.
Oversupply
Cameron LNG is one of four new US LNG export terminals to start production this year, three of which are located on the Gulf Coast. A fifth train was also brought online at Sabine Pass – the first export project in the Lower 48 US states. Coupled with new LNG export capacity starting up in Australia, this has led to a glut of LNG supply that has put downward pressure on prices for the fuel.
Asian spot prices for LNG fell for the fourth consecutive week in mid-November, with trad- ers warning of further declines exacerbated by oversupply, full inventories and mild weather.
The average LNG price for December deliv- ery into north-east Asia was estimated at $5.40
Cameron LNG is one
of four new US LNG export terminals to start production this year, contributing to global oversupply.
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Week 47 27•November•2019