LONDON: Asian spot liquefied natural gas (LNG) prices retreated from a seven-month high as demand remained muted due to warmer weather and as market players did not envisage production losses from the possible return of strikes in Australia.
The average LNG price for November delivery into north-east Asia fell by 10% to $13.5 per million British thermal units (mmBtu) from $15 the previous week, industry sources estimated.
“Demand for LNG in north-east Asia remains limited, with a great proportion of recent bids for cargoes coming from firms seeking to secure LNG to meet existing commitments to supply end-users,” said Samuel Good, head of LNG pricing at commodity pricing agency Argus.
“There may be some scope for minor early heating demand in north-east China with forecasts for daily lows in Beijing holding slightly below historical norms through the coming weeks, though strong domestic gas production and pipeline gas imports could limit any impact on LNG demand,” Good added.
Efforts to finalise a pact that ended strikes at Chevron’s two Australian LNG plants stumbled on Thursday, when workers voted to restart stoppages after unions accused the U.S. energy major of reneging on commitments.
Alex Froley, LNG analyst at data intelligence firm ICIS, said that while the this may ignite some market interest, the prospect of a physical shutdown still remains slim, especially because the Australian plants continued to load cargoes during the recent strike action.
“Unless there are any unexpected problems, the fundamentals look bearish, particularly with the weather keeping a lid on heating demand,” Froley said.
In Europe, gas prices at the Dutch TTF hub hit new lows this week, mainly supported by high stock levels in Europe, said Dominic Gallagher, head of LNG broking at Tullett Prebon.
“This could see further short term weakness but, with one eye on peak Winter requirements, there may be scope for more shape to appear between the prompt and Q1. Asian demand may support the front end and prevent too much contango forming, but it is yet to be seen how deep Asian demand is,” Gallagher said.
S&P Global Commodity Insights assessed its daily northwest Europe LNG Marker (NWM) price benchmark for cargoes delivered in November on an ex-ship (DES) basis at $10.503/mmBtu on Oct. 5, a $0.65/mmBtu discount to the November gas price at the Dutch TTF hub.
Argus assessed the price at $10.40/mmBtu while Spark Commodities assessment was at 10.489/mmBtu.
Spot LNG Freight rates softened further this week to levels less than half what they were last year, amid higher prompt vessel availability.
Atlantic rates fell to $147,000/day on Friday, while the Pacific rates eased to $168,250/day, said Edward Armitage, an analyst at Spark Commodities.