Amid plunging gas demand, LNG producers are under pressure to dump their cargoes on the spot market, further depressing already low prices, Reuters?reports, citing commodity trading sources. ?We're seeing?

Amid plunging gas demand, LNG producers are under pressure to dump their cargoes on the spot market, further depressing already low prices, Reuters?reports, citing commodity trading sources.

?We're seeing more sell tenders these days due to a combination of factors like coronavirus and DQT, but this also means that when demand rebounds, buyers will return to the market to seek spot cargoes,? one source told the news agency, referring to the downward quantity tolerance stipulation typical of take-or-pay contracts for natural gas that allows the buyer to buy less than agreed without consequence.

In the present situation of supply and demand, many LNG buyers in northern Asia are invoking the DQT clause, the sources said.

The search for buyers intensified after Indian LNG importers, chief among them Petronet, earlier this month?issued?force majeure notices to suppliers following the start of a 21-day nationwide lockdown to stem the spread of the Covid-19 epidemic on the subcontinent.

The force majeure was prompted by the closure of all non-essential businesses in one of the world's top consumers, cutting off a buying spree that helped LNG prices tick higher as Indian LNG consumers took advantage of the low prices.

China's largest LNG importer, PetroChina, also?declared?force majeure on imports earlier this month, including both LNG and pipeline gas, as the viral disease crippled demand.

Japan, the world's largest LNG importer, while short of declaring force majeure on deliveries, has also ordered a partial lockdown that will inevitably reduce demand for the commodity.

Reuters notes that spot LNG prices in Asia slipped below $3 per mmBtu this week after last week they touched a record low of $2.70 per mmBtu. A reversal of LNG's fortunes seems unlikely, at least in the short term, with stockpiles in Asia also high for this time of the year, discouraging buyers even at current prices.

By Irina Slav for Oilprice.com

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