SINGAPORE: Asia spot liquefied natural gas rose for a second week to hit a nine-week high, as lower winter temperatures across the northern hemisphere lifted heating demand.
The average LNG price for March delivery into Northeast Asia was estimated at $11.35 per million British thermal units (mmBtu), up 12.4% from $10.10/mmBtu the previous week and its highest levels since November 21, industry sources said.
“The weather was still at the forefront of developments, with on one side Asia still being cold in several countries, meaning that heating demand will remain elevated,” said Klaas Dozeman, market analyst at Brainchild Commodity Intelligence.
“However, it did not result in Asian prices equaling their European ones, where cold circumstances also increased heating demand over the continent. The premium on LNG still remained in Europe and caused several vessels to change course to Europe.”
At least two LNG tankers initially eastbound diverted towards Europe and Turkiye in the past week, shiptracking data showed.
“Outside of the recent cold snap, and subsequent spike in front month pricing the market is absorbing the volatility,” said Toby Copson, managing partner at Davenport Energy Partners.
“Fundamentals remain on the weaker side, there is length in the market and marginal heating demand is being absorbed by what’s on water. Chinese are selling in to this so I don’t expect elevated prices unless temperatures remain for an extended period.”
In Europe, S&P Global Energy assessed its daily Northwest Europe LNG Marker (NWM) price benchmark for cargoes delivered in March on an ex-ship (DES) basis at $11.622/mmBtu on January 22, a $0.81/mmBtu discount to the price at the TTF hub.
Argus assessed it at $11.76/mmBtu, while Spark Commodities assessed the February price at $12.444/mmBtu.
“Prices initially turned higher on expectations for a ‘beast from the east’ cold event towards the end of this month pulling cold air from Russia, and have continued to climb on forecasts for cold weather in February, as well as the potential for U.S. LNG export disruption,” said Martin Senior, Argus head of LNG pricing.
“The market is bracing for a potential short-term downturn in U.S. LNG exports this weekend because of an exceptionally cold weather pattern sweeping over most of the southern U.S., where U.S. LNG export infrastructure is located.”
Meanwhile, hedge funds executed one of the largest repositioning events in TTF history last week, flipping from net short to net long amid an intense short squeeze that sent prices soaring to highs not seen since last summer, said independent gas analyst Seb Kennedy.
Commercial operators, however, stopped accumulating length and began selling hard into the rally, hedging future sales at profitable prices, he added.
In LNG freight, Atlantic rates further dropped to $16,250/day, while Pacific rates fell to $34,250/day, said Spark Commodities analyst Qasim Afghan.
He added that the U.S. front-month arbitrage to Northeast Asia via the Cape of Good Hope closed out further this week.
“This week saw the strongest signal to Europe for U.S. prompt cargos since December 2022, driven by continuing falls in the JKM-TTF spread as the JKM fails to match the recent TTF rally,” he said.
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