LONDON: Asian spot liquefied natural gas (LNG) prices remained at their 22-month lows on Friday, as demand in China, Japan and South Korea was muted, keeping buyers away from spot market and encouraging continuous flows to Europe.
The average LNG price for June delivery into northeast Asia was $11.5 per million British thermal units (mmBtu), down $0.50 or 3.8% from the previous week, industry sources estimated.
“Rates have continued to erode, driven by weak spot demand during a typically less active period. South Asia and the Indian subcontinent are more active, taking advantage of lower numbers and absent contender countries,” said Toby Copson, global head of trading at Trident LNG.
Forecast of high temperatures across South Asia is expected to shore up demand.
In China, the maximum temperature forecasts for southern China over the coming fortnight are broadly in line with historical norms, suggesting little potential for early summer cooling demand in the region, said Samuel Good, head of LNG pricing at commodity pricing agency Argus.
He added that while South Korean and Japanese forecasts are expected to have slightly above-average temperatures, it is too early for that to translate to a sizeable shift in cooling power demand, especially as both markets continue to hold sizeable LNG stocks and are set to see much more nuclear generation this summer.
Global LNG: Asian spot prices slip as muted North Asia demand weighs
In Europe, Argus assessed its daily northwest Europe (NWE) LNG price delivered in June on an ex-ship (DES) basis at $10.55/mmBtu on April 27, a $2.10 discount to the June gas price at the TTF Dutch gas hub.
The front-month gas prices at the Dutch TTF hub continued to ease recently despite last week’s below average temperatures that are also set to last for next week.
“These relatively low temperatures will keep gas demand higher than normal, especially with a negative dark spread and a positive spark spread,” said Hans Van Cleef, chief energy economist at PZ - Energy Research & Strategy, referring to gas-fired generation being more economic than coal generation.
Spark Commodities assessed Northwest Europe DES LNG price for May deliveries fell to a new low since June 2021, at $10.687/mmBtu, on strong supplies and high inventories.
Alex Froley, LNG analyst at data intelligence firm ICIS, said the market is generally looking much more comfortable now, with Europe’s high stock levels removing concerns about whether storage can be refilled before next winter.
Traders are also keen to know how fast Europe’s industrial demand could rebound, but while summer prices are lower, it could be difficult for some users to return in strength if they fear higher prices in the winter ahead, Froley said.
“Forward prices suggest winter months at higher levels than summer. And while gas prices are down from 2022’s massive spikes, they remain double the long-term average, and could do so for some time to come,” he added.
On LNG freight, the Atlantic spot rates held steady this week at $43,000 per day on Friday, said Edward Armitage, an analyst at Spark Commodities.
Pacific rates continued to soften, falling to $52,500 per day on Friday.
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