Henry Hub and Asian spot LNG widened to a 2-year high

Who wants to play arbitrage? The spread between Henry Hub and Asian spot LNG widened to a 2-year high and is now nearing a hefty $7/mmbtu, up from zero back in June.

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The spread almost double since the beginning of November, driven by bearish factors in US and bulls riding in Asia.

In the US milder the expected weather, a looming storage overhang (up by 10% yoy) put further downward pressure on Henry Hub, loosing almost 30% of its value since the start of the US heating season.

In contrast, in Asia winter bulls have pushed JKM to $9/mmbtu, amidst colder weather in northeast China, coal caps in Korea, and a number of outages at LNG liquefaction plants (Qatargas T4, Gorgon worries, Snøhvit fire, etc), further tightening the overall supply-demand picture for LNG.

Meanwhile, US LNG is displaying strong upward flexibility, with feedgas flows reaching new records, trending at above 300 mmcm/d with Corpus Christi T3 starting commercial operations as well.

And the spread between JKM and TTF climbed to $3.5/mmbtu, its highest since summer 2018, meaning that the steep fall in LNG deliveries to Europe is set to continue.

What is your view? How will inter-regional price spreads evolve through the winter season? Any downside risks for Asian spot prices?

Source: Greg Molnar

See original post by Greg on LinkedIn.