Inter-Basin Spread LNG
Can anyone explain to me what an inter-basin spread is in LNG and what it means for the overall industry now that it is positive? My (rudimentary) understanding is that it is simply the difference in spot price of LNG at different basins, this particular time being Platts JKM (delivered to NW Asia) and Dutch (European). Given this, what does this imply for the industry. I have struggled to find this online, and simply want to gain a better understanding of the industry.
Hi Intern in S&T - Comm, check out these threads:
More suggestions...
Hope that helps.
Your rudimentary understanding is correct. Inter-basin is is mostly the spread between JKM and TTF or TFU in USD. The implication is that it affects the flow of the cargoes. JKM is usually at premium to TTF(Asia premium), but this relationship has recently been disrupted due to strong demand in Europe.
Another implication is for those that trade the spread. For instance, we sometimes buy TTF and sell in JKM, so we trade the spread to lock in the profit. Hope this helps.
+1. Remember from your past post you mentioned how pricing stuff in JKM ain't fun, but TTF vol ain't fun either. Not a mainstream topic but the usual "spreads = freight cost" math seems much harder for now and possibly future. Forget %brent math ha.
Woah we digging deep...at a high level think of it like this as well;
As other poster said we have 2 markets, TTF and JKM. One market is a very mature market that has lots of underground storage and their pricing depends on the storage spreads. The other market lacks storage and has very high baseload demand but its "demand peaks and troughs" are less so than the mature market cause they lack storage. Due to the lack of storage, the mature market basically had depend on mother nature for their fate, "remember we said their demand peaks and troughs" are worse so when demand intensified it overwhelms their storage so now they need more flowing supply but there is no more continental supply. So as mentioned we need to change the pricing paths and relationships for cargoes.
Now we got all that down...I am Brasil how do I price my demand? I do not have extensive storage either...but I am closer to one market than the other...etc.
Google "linear programming for LNG optimization"
linear programming for LNG is more used to schedule cargoes?
Correct its more the pure physical side, but the information OP is seeking does not exist out there. LNG historically was a series LTC with different options/stipulations. Understanding how the physical is scheduled will help one get a sense of why a "basis spread" is important. Maybe the google, LNG portfolio optimization is a better search.
You are a very experienced trader. Any chance I can have your contact to learn from you?
marcellus_wallace hit all the points as per usual! I'm just in here to say I never thought I'd see the day of buying back a Far East cargo to sell into Europe, writing down two PC transits, idling, etc. and yet still capture margin. What a time
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