Daily LNG price update (glut)

The oil price fell again last night with Brent down another 2.5% to $56.09 as I write. The culprit was a huge surge in US stockpiles, much more than expected, which has that nations swimming in the black stuff:

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The culprit is surging production:

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This is entirely to be expected. As the margin and capital squeeze hits shale oil producers, they will respond with mass cost cuts and a charge towards higher volumes to make up for lost prices. It will run until the combined falling rig count and rapid well depletion rate combine to pull back the production increases, which ought to be around May.

Before then we’ll very likely retest oil price lows but I remain comfortable that from there the price bottom is in barring some global shock. The indicative LNG contract price today is $8.19mmBtu:

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In wider LNG news, APLNG has received “first gas”, from LNGworldnews:

Australia Pacific LNG informed it had reached a significant milestone with the arrival of first gas from its coal seam gas fields in the Surat Basin to its liquefied natural gas facility on Curtis Island, near Gladstone, Queensland.

The arrival of the first gas into the LNG facility also marks the completion of commissioning of the 530km high-pressure gas pipeline, another important milestone for the project, the company said in a statement.

With the completion of the pipeline and the arrival of the gas, Australia Pacific LNG can initiate the commissioning of the power generation facilities on the island.

The commissioning phase of the LNG facility also includes the verification and testing of each system of the first processing train and the two LNG tanks; part of which has already commenced.

APLNG is a joint venture between Origin Energy Limited (37.5%), ConocoPhillips (37.5%) and Sinopec (25%).

The white elephant is 90% complete now and will pump first gas in Q3 before full ramp up in Q1 next year. Sinopec is also the major customer for the project with a commitment to buy more than three-quarters of the offtake, an arrangement it is currently trying to get out of, quite sensibly.

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