Steep Discount On Russian LNG Disappears

Russian LNG suppliers have recently sold LNG cargoes in Asia at close to the prevailing spot market prices, suggesting that fears of sanctions on Russia’s LNG exports have nearly disappeared

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Russian LNG suppliers have recently sold LNG cargoes in Asia at close to the prevailing spot market prices, suggesting that fears of sanctions on Russia’s LNG exports have nearly disappeared, traders familiar with the recent deals told Bloomberg on Thursday.

Earlier this year, buyers in Asia were purchasing LNG from Russia at heavy discounts amid concerns about potential sanctions or price caps on Russian LNG. Russia’s gas exports are not under any sanctions, but buyers in the West have largely preferred to source LNG from other providers if given a choice.

The recent sales at roughly market prices indicate that buyers’ fears of sanctions or reputational damage have significantly subsided since the start of the Russian invasion of Ukraine.

Over the past week, Sakhalin Energy sold three LNG cargoes to Asia for loading in December at close to market prices, and one was even sold at a premium, Bloomberg’s sources said.

This compares with several LNG cargoes that were offloaded in September in Asia and were paid at hefty discounts to the spot LNG price at the time of the purchase, the traders told Bloomberg.

Russia has recently ramped up its LNG exports to a six-month high. Russian exports of LNG rose in October to their highest level since March, vessel-tracking data compiled by Bloomberg showed last week. In October, Russia’s LNG exports increased by 1.1% compared to October 2021 to the level last seen in March, just after the Russian invasion of Ukraine.

The top importers of the cargoes—although nearly half of them are still en route to their final destinations—were France, China, and Japan, according to the data compiled by Bloomberg.

Traders have told Bloomberg that China is buying a lot of Russian LNG to take advantage of a discount for Russian cargoes.

In September, Chinese imports of LNG from Russia rose by one-third compared to the same month in 2021, according to Chinese customs data cited by Bloomberg. All imports of LNG into China were down by 12% in September.

By Tsvetana Paraskova for Oilprice.com / 10 Nov 2022, 6:42 AM CST