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Higher Asian LNG prices raise prospect for Nigeria

Higher Asian LNG prices raise prospect for Nigeria

Nigeria may most likely earn more dividends from its Liquefied Natural Gas (LNG) assets in coming weeks as prices in one of its main market, Asia, to its highest level this year, as a result of stronger demand in the region, as well as supply concerns in the United States due to a hurricane and stronger European gas prices.

In Nigeria, the natural gas sector is oriented towards the export market with over 50 percent sold at the Asia market, which is determined by economic fundamentals as against a regulated domestic regime, with LNG being the major revenue earner for the country in the gas industry.

Bloomberg reported that three trades for liquefied natural gas cargoes executed by commodity trading major Vitol made the company the talk of the LNG town as it pushed the Asian regional LNG benchmark up by as much as 20 percent to $6.761 per MMBtu—the year’s high from as low as $2.

The deals included one purchase of an LNG cargo from Petrochina company for December 5-9 2020, one from Gunvor Group for December 13-17 delivery to China at a premium to a European benchmark, and one from Trafigura Group for December 1-5 delivery to China, at $6.87 per MMBtu.

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“Apart from this deal, we expect LNG demand to increase by four billion cubic meters this winter and that’s led by growth in China, Japan and South Asia,” said analysts from Refinitiv, as quoted by Gasworld, earlier this month.

LNG prices have received much-needed support recently, mainly from weather forecasts expecting a cold winter in the northern hemisphere and specifically in Asia. If the forecasts materialise, they will provide a vital boost to LNG trade as Nigeria and other exporters have struggled with an oversupplied market that started well before the pandemic.

“We are expecting a substantial year-on-year increase in Northeast Asia’s Q4 2020 demand for LNG because of increased heating load compared to last winter,” consultancy Energy Aspects said in a report, adding that lower nuclear output in South Korea may also create additional LNG demand.

An excess in the supply of LNG globally had pushed benchmark prices for the commodity lower when the coronavirus emerged. Then they fell further, following the path of oil. LNG fell as low as $2 per MMBtu