A similar about-turn has been seen in Asia where record Chinese buying helped drive the price of LNG higher back in December. A mild winter has since then left the market oversupplied with the price of the benchmark Japan/Korea Marker (JKM) dropping to a 17-month low at $7.3/therm.
These developments have seen LNG cargoes being diverted towards Europe, thereby pushing down the price there as well. The benchmark next-month gas contract in the Netherlands has lost more than one-third since the winter season started on October 1. It is currently trading at €18.5/MWh, the equivalent of $6.1/therm.
Increased global availability of seaborne LNG from the US, Australia and Qatar is likely to continue to reduce the major price discrepancies between the US, Europe and Asia. Iron ore surges higher on deepening supply concerns
The fallout from the disastrous dam burst in Brazil and subsequent crisis at Vale SA, its owner and global top producer of iron ore continues to be felt. Iron ore futures traded in Singapore jumped to $91/tons this week as the supply outlook worsened further after Vale was forced to invoke force majeure on another 30 million tons of annual production on top of the 40 million following the dam burst.
State regulators in Brazil are going after the company and it has raised concern that supplies from not only the Vale operated mines, but also those of other miners, can be impacted. As long as the news continues to focus on the continued loss of supply the potential downside risks associated with slowing economic activity will be ignored.
On that basis the market is currently behaving like oil did back in early October when the expected imminent loss of Iranian barrels led to speculation that oil could hit $100/barrel before year-end (2018). We know what happened once the supply outlook became clearer and a similar situation here cannot be ruled out. But for now, the market is full of worry about supply shortages, and the response from Chinese buyers once they return from their New Year holiday will help set the tone and direction going forward.