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MarketScreener Homepage  >  Equities  >  Stock Exchange of Hong Kong  >  CNOOC Limited    0883   HK0883013259

CNOOC LIMITED

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Free-falling LNG prices wreak havoc on trade amid coronavirus fears

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02/07/2020 | 02:54pm EST
FILE PHOTO: A liquified natural gas (LNG) tanker is pictured near a terminal in Dalian, China

Record low prices for liquefied natural gas (LNG) are roiling the global gas market, creating havoc as traders rush to find alternative locations for cargoes with Chinese buyers rejecting shipments amid the coronavirus epidemic.

Asian spot prices for LNG <LNG-AS> have already tumbled to troughs of $3 per million British thermal units (mmBtu) - less than half of what they were at the same time last year.

At least one cargo bound for India has already traded below $3/mmBtu, down 30 cents within a week, traders said.

Concerns that Chinese companies could back out of contracts because of the impact of the coronavirus outbreak have slowed oil and gas sales into China. Reuters reported on Thursday that China's top LNG buyer China National Offshore Oil Corporation (CNOOC) declared force majeure on some prompt LNG deliveries with several suppliers.

Energy ship broker and consultancy firm Poten & Partners said on Friday at least five LNG cargoes had been diverted from China, and another 30 due to land there this month could face diversions, delays or force majeure declarations.

"Prices are free-falling just within this week," a Singapore-based LNG trader told Reuters. "This kind of force majeure situation is unprecedented and has never happened before so it's big news."

In one example of the turmoil in the market, an executive from French oil major Total said it had rejected a force majeure notice from an LNG buyer in China, without identifying the company.

At least one cargo bound for China, the world's second-largest LNG importer, has diverted and is heading towards Singapore storage tanks, several sources told Reuters. Three other vessels bound for China have reduced speed, one of them said.

At least two major suppliers to CNOOC told Reuters that the firm had requested that its cargo deliveries be delayed. A CNOOC executive declined to comment.

Consultancy Rystad Energy on Friday cut its forecast for Chinese LNG demand growth this year to 4.7%, from a year on year gain of between 10% and 13%.

(GRAPHIC: Key Asia LNG price hits record low as China's top buyer suspends buying amid virus threat - https://fingfx.thomsonreuters.com/gfx/ce/7/8479/8460/AsiaLNGRecordLow.png)

WHERE CAN CARGOES GO?

Traders are now casting around for homes for unwanted cargoes. India, which recently commissioned an LNG terminal, has some scope for more purchases, but is restrained by inadequate pipeline infrastructure, industry sources said.

Europe, which also has strong seasonal winter gas demand, is also struggling to accommodate more, they said.

"Europe absorbed most of the incremental LNG supply in 2019," said James Taverner, director at research and consultancy firm IHS Markit.

"However, with gas storage at high levels, limited opportunity for further power sector fuel switching, and uncertainty around how pipeline suppliers will respond, Europe may struggle to accommodate the surplus in 2020."

Major buyers in Japan and South Korea such as KOGAS and JERA could benefit as they are able to tap demand from utility companies, but overall consumption levels there are also limited due to mild weather, sources said.

"Low spot prices will certainly challenge the economics of many export projects," Taverner said. "Some LNG suppliers may even need to reduce their exports if they become uneconomic, but there are contractual, logistical, and portfolio considerations that may limit any turning down (of cargoes)."

By Jessica Jaganathan

Stocks mentioned in the article
ChangeLast1st jan.
CNOOC LIMITED -2.12% 12 End-of-day quote.-7.41%
IHS MARKIT LTD. -0.58% 80.29 Delayed Quote.6.56%
LONDON BRENT OIL 0.78% 58.1 Delayed Quote.-13.27%
TOTAL -0.18% 44.625 Real-time Quote.-9.16%
WTI 0.61% 52.465 Delayed Quote.-16.22%
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Financials (CNY)
Sales 2019 225 B
EBIT 2019 81 625 M
Net income 2019 58 320 M
Debt 2019 111 B
Yield 2019 5,75%
P/E ratio 2019 8,32x
P/E ratio 2020 8,21x
EV / Sales2019 2,63x
EV / Sales2020 2,52x
Capitalization 482 B
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Mean consensus BUY
Number of Analysts 17
Average target price 14,38  CNY
Last Close Price 10,81  CNY
Spread / Highest target 48,6%
Spread / Average Target 33,1%
Spread / Lowest Target 18,1%
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Managers
NameTitle
Ke Qiang Xu President, CEO & Executive Director
Dong Jin Wang Chairman
Wei Zhi Xie Chief Financial Officer
Sung Hong Chiu Independent Non-Executive Director
Juen Yee Lau Independent Non-Executive Director
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