The Dubai Supply Authority (DUSUP) is holding a private tender to buy between four to six liquefied natural gas (LNG) cargoes each in 2016 and 2017, and is nearing the final stages of the process with an award expected soon, trade sources said.
Around 15 companies participated in the process via bilateral discussions and price offers were extremely aggressive, sliding below 12 per cent of the price of Brent crude oil, traders that participated in the talks said.
Depending on how much below 12 per cent, it could work out to a price of around $5 per million British thermal units (mmBtu) for two-years worth of supply, a trader said, a significant bearish price indicator for global LNG markets.
Spot LNG prices are currently assessed at around $6.80/mmBtu for November delivery. Medium-term LNG supply deals tend to be linked to the price of Brent crude, currently trading just below $50 a barrel.
DUSUP declined most firms offering to supply, including Swiss trading houses and banks, the trader said.
Two oil majors have progressed to the final stage, making it likely that they will win, another trader said.
An award is expected this weekend. "The tender was announced right after Jordan and maybe that's why prices are so low, because Jordan cargoes went at below 12 per cent Brent or 12 per cent flat, some companies that lost out may have decided to go extremely aggressive," the first source said.
Last weekend Jordan awarded half of its four-year, up to 78-cargo LNG buy tender to Royal Dutch Shell which will cover deliveries in 2016 and 2017, overlooking commodity traders for the business.