LONDON: Asian spot liquefied natural gas (LNG) prices were down this week but remained 33% up from its lowest level in June, tracking gas prices in Europe where ample inventories keep demand muted.
The average LNG price for August delivery into north-east Asia fell by 11% from the previous week to $12 per million British thermal units (mmBtu), industry sources estimated.
“Asian pricing has been beholden to euro market movements. Low liquidity has pushed spot rates with a touch of short covering,” said Toby Copson, global head of trading at Trident LNG, adding that the focus now is at the arbitrage out of the United States. Arbitrage refers to cargo diversion from one market to another - Asia and Europe - to seek a better return.
Alex Froley, LNG analyst at data intelligence firm ICIS said that Competition between Europe and Asia has been re-igniting as Asian buyers return to the market to take advantage of this year’s lower prices and European buyers need to ensure sufficient cargoes to continue storage injections. In the first 22 days of June, China has already imported as much LNG as it did in the whole month last year, and imports in the three month from March to May were up around 13%-18% from last year, Froley said. “China isn’t back up to 2021’s record highs yet, but is showing a more consistent recovery from 2022’s levels,” he added. Auguste Breteau, deputy head of LNG pricing at commodity pricing agency, said that Northeast Asia is now starting to enter heavy cooling demand territory and unusually hot weather is forecast in Beijing over the next fortnight as well as to a lesser degree in Seoul.
In Europe, expectations of weaker gas supply in the short-term due to Norwegian outages have pushed traders to cover short positions, but the return of some production and ample gas inventories have helped keep the market muted. Hans Van Cleef, chief energy economist at PZ - Energy Research & Strategy, said that while TTF prices recovered from its lowest levels in June on Norwegian maintenance and signals of increased LNG imports of China, that’s not so much as European inventories are well filled. “However, the risks are brought back in focus and the market is still very nervous about possible shortages, a sign that the energy crisis is far from over yet,” he added.
S&P assessed its daily north-west Europe LNG Marker (NWM) price benchmark for cargoes delivered in August on an ex-ship (DES) basis at $10.449/mmBtu on June 22, a $0.600/mmBtu discount to the August gas price at the Dutch gas TTF hub, according to Allen Reed, managing editor of Atlantic LNG.
Argus assessed the north-west Europe DES price at $10.45/mmBtu, while Spark Commodities estimated the price at $10.442/mmBtu. Spot LNG freight jumped this week as vessel availability starts to tighten, with Atlantic spot rates touching a new high since January at $69,250/day on Friday, and Pacific rates rising to $65,250/day, said Edward Armitage, an analyst at Spark Commodities.