An Australian LNG cargo is heading to a terminal in Mexico in a rare trade, reflecting the extent of the oversupply in the Asian LNG market and the high inventories with regional utilities.
The 94,528 dwt vessel British Mentor departed from the Chevron-operated Wheatstone LNG project on March 15 and was floating for around two weeks without a destination, vessel trackers cFlow and Kpler showed.
British Mentor is now on its way to Manzanillo, Mexico where Comision Federal de Electricidad (CFE) operates an LNG terminal. The vessel was chartered by oil major BP who most likely conducted the trade, Singapore-based traders said.
BP declined to comment on the trade.
The shipment is unusual because Australian LNG cargoes are generally shipped to customers in North Asia, such as China, Japan, or South Korea, due to supply contracts and geographical proximity.
But in recent weeks there has been a lack of buying appetite in Asia as natural gas demand is hit by high inventories, coronavirus-driven lockdowns and slowing economies, forcing LNG producers to look for new buyers.
Additionally, the Atlantic market has somewhat tightened with nearly 20-30 US cargo cancellations per month due to weak demand, allowing markets like Mexico to command a premium. Even if outright prices do not have an open arbitrage, big players like BP may have internal optimization opportunities that allows the trade to be feasible.
Jeff Moore, Manager, Asian LNG Analytics at S&P Global Platts said the British Mentor’s latest route was certainly one of the few times an APAC cargo has gone to North America in recent years.
“I think this certainly speaks to the lack of spot interest here in Asia. You have a situation where even though supply within the basin is slowing down, there is still over-contracting which limits spot purchasing and causes distortions to form,” Moore added.
Another unusual trade is the GDF Suez chartered vessel Point Fortin to Mexico’s Altamira terminal that left the Fos Cavaou LNG Terminal in southern France on June 4. Traders said this was a re-load cargo.
Altamira has not imported an LNG cargo since October 2019, vessel tracking shows, and its previous imports have either been from the US or Nigeria.
The S&P Global Platts JKM for July was assessed at $2.150/MMBtu on June 10, and has been rangebound around the $2/mmBtu level for several weeks.