SINGAPORE: Asian spot liquefied natural gas (LNG) fell to a fresh low this week, easing to its lowest levels in nearly three years, as weak demand in Asia and Europe weighed on prices.
The average LNG price for April delivery into north-east Asia fell $0.50 this week to $8.30 per million British thermal units (mmBtu), its weakest levels since mid-April 2021.
“Asian and European pricing has been declining in tandem on the back of fundamental weakness and the absence of a relative floor in both basins,” said Toby Copson, head of energy, APAC, at commodities broker Marex.
“There could be a brief reprieve as some players cover at attractive spot levels, but this might not sustain and further dips to historical normalcy could prevail.”
Asian spot LNG prices have lost nearly 30% of their value since the start of the year amid tepid demand and healthy inventories in both east Asia and Europe.
The fall in prices had incentivised LNG importers from markets like China and India to increase spot purchases. Thailand energy company Gulf Energy Development Pcl also said in its earnings announcement last week it is expecting its first LNG shipment at the end of February.
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The cargo, which is the first LNG import by a private company in Thailand, will be for power production at the Hin Kong Power project, added Gulf Energy.
Copson from Marex said that Chinese tier two importers, or non-state backed firms, may see this as an opportune time to book cargoes, but “the consensus is that there is more downward risk to come in the absence of any real demand.”
In Europe, S&P Global Commodity Insights assessed its daily North West Europe LNG Marker (NWM) price benchmark for cargoes delivered in April on an ex-ship (DES) basis at $6.655/mmBtu on Feb. 22, a 34-month low amid overall bearishness in the gas and LNG complex, and a $0.50/mmBtu discount to the April gas price at the Dutch TTF hub.
Argus assessed the price at $6.850/mmBtu, while Spark Commodities assessed it at $6.858/mmBtu.
“At the moment we have pretty mild weather circumstances in Europe. As a result, gas demand is relatively low. This, in combination with the fact that Europe gas inventories are above average for the time of the year, continues to weigh on natural gas prices,” said Hans Van Cleef, chief energy economist at PZ - Energy.
“LNG inflows remain strong, and as a result, the inventories are declining only slowly. This provides a very good starting position ahead of the filling season, which will start early April.”
Meanwhile, spot LNG freight rates in the Atlantic fell to their lowest levels in eight months, while Pacific rates were nearly unchanged, said Henry Bennett, head of pricing at Spark Commodities.
Atlantic rates this week were estimated at $49,750/day on Friday, while Pacific rates were at $58,250/day.