Asian spot LNG prices at five-month high on firm demand, geopolitical risks

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Asian spot liquefied natural gas (LNG) prices rose for the fourth straight week and hit its highest level in five months amid firm demand, tracking European gas market gains amid concerns over possible disruption to Russian gas supply.

The average LNG price for July delivery into north-east Asia LNG-AS rose to $12.30 per million British thermal units (mmBtu), its highest level since mid-December and up from $10.90/mmBtu in the previous week, industry sources estimated.

“Spot LNG prices remain strong, supported by firm demand, unexpected outages and ongoing geopolitical risks,” said Alex Froley, senior LNG analyst at data intelligence firm ICIS.

“Asian buyers have been increasing demand to take advantage of this year’s lower prices relative to last year, with countries including China and Thailand seeing record import levels,” he said.

Hot weather across some of the Asia region’s markets has lifted power demand, supporting purchasing activity, said Samuel Good, head of LNG pricing at commodity pricing agency Argus, adding that temperatures in eastern China are forecast to remain above seasonal norms, supporting power gas burn.

In south-east Asia, some buyers recently issued tenders for longer-term cargoes, according to Charles Costerousse, senior LNG analyst at data analytics firm Kpler.

The Japan, Korea, Taiwan and China (JKTC) region and India have in total received 14.06 million metric tons (mt) of LNG so far for May this year, compared to 17.07 mt for May last year,” he said.

In Europe, gas market gains have tightened discounts to the Asian market substantially, amid maintenance outages in Norway and concerns over Russian pipeline supply after Austria’s OMV OMVV.VI said that gas supplies from Russia’s Gazprom GAZP.MM could be suspended in connection with a foreign court ruling.

The market has to factor in the possibility of heightened geopolitical risks. In particular, the possibility of disruption to either Russian pipeline or LNG exports, or both. Austria’s OMV said it could lose pipe supply from Russia. Europe, meanwhile, is considering restrictions on Russian LNG,” ICIS’ Froley said.

S&P Global Commodity Insights assessed its daily North West Europe LNG Marker (NWM) price benchmark for cargoes delivered in June on an ex-ship (DES) basis at $11.118/mmBtu on May 23, a $0.20/mmBtu discount to the July gas price at the Dutch TTF hub.

Argus assessed the July delivery price at $11.150/mmBtu, while Spark Commodities assessed the June delivery price at $11.003/mmBtu.

In the United States, Argus’ Good said Freeport LNG production has held strong in recent days at levels that would suggest all three trains are operating near to capacity. Production at other U.S. terminals has also been largely steady.

LNG freight rates in the Atlantic saw the highest week-on-week increase this year and hit the highest level since the end of March at $48,250/day on Friday. The Pacific rates fell to $44,500/day, said Spark Commodities analyst Qasim Afghan.

Source: Reuters