OREANDA-NEWS. December 08, 2016. Japanese oil-indexed LNG prices for delivery in the second and third quarters of 2017 have risen, tracking a rally in crude markets at the end of last month.

First-quarter LNG prices have barely moved since oil producers' group Opec agreed to cut production on 30 November, because of the 3-6 month lag on oil-linked contracts. The first-quarter rose by only 4?/mn Btu to \\$7.49/mn Btu on 6 December.

But the second-quarter contract has increased by 47?/mn Btu to \\$8.02/mn Btu, while third-quarter prices are 85?/mn Btu higher at \\$8.49/mn Btu.

The jump in long-term oil-indexed prices has come during a period when delivery programmes for the following calendar year are arranged and may encourage Japanese LNG importers look to spot market supplies in 2017 instead of taking additional LNG under long-term contracts.

The Argus ANEA spot price assessment for des northeast Asia deliveries in January-February is \\$8.62/mn Btu — \\$1.13/mn Btu above the first-quarter oil-linked price. ANEA has risen by \\$1.15/mn Btu since 1 December, following the shutdown of a 5.2mn t/yr LNG train at Australia's 15.6mn t/yr Gorgon project.

But second and third-quarter spot prices could be much lower, with new LNG production expected to start up in 2017. New liquefaction capacity includes the first 4.45mn t/yr train at Australia's Wheatstone project, a first 5.75mn t/yr of capacity at Cove Point on the US Gulf coast and the third and fourth 4.5mn t/r trains at the 25mn t/yr Sabine Pass plant, also on the Gulf coast, the first 5.5mn t/yr train Russia's Yamal LNG, and the 3.6mn t/yr Bintulu train-nine expansion in Malaysia.

The average second-quarter US Gulf coast fob price is \\$5.18/mn Btu, while freight costs to Japan are \\$1.54/mn Btu. This would give a Japanese delivered price of \\$6.72/mn Btu, \\$1.30/mn Btu below the oil-linked price for the same period.