LONDON: Asian spot liquefied natural gas (LNG) prices fell further this week to its lowest level in 10 weeks, tracking Europe’s bearish gas price momentum and amid weak demand due to comfortable levels of storage.
The average LNG price for April delivery into north-east Asia was at $13.50 per million British thermal units (mmBtu), down from $14.00 last week and the lowest since December 20, industry sources estimated.
“Market conditions are fragile right now. Asia is well-supplied on a marginal basis, some forward strip tenders are out, but fundamentally, there is no tightness,” said Toby Copson, chairman at Davenport Energy Partners.
“Volatility is in from potential Russian supply re-emerging and a lack of spot demand. I expect some further downside until seasonal weather draws stocks to top-up levels,” he added.
Buyers in China or Korea are still away from the market due to relative comfortable storage levels and supply but some cold in China at the start of March might bring back some late buyers, said Klaas Dozeman, market analyst at Brainchild Commodity Intelligence.
Meanwhile, prices are still too high for price sensitive buyers in south-east Asia, with only a few countries active on the spot markets: Bangladesh, Thailand, Philippines.
Shell expects 60% rise in global LNG demand by 2040
However, the drop in prices means that the level at which Asiann buyers are expected to return to the market is coming closer, Dozeman added.
Some Indian demand has picked up, with some state-owned firms issuing tenders seeking cargoes in recent days. This also comes as the hottest part of the year for South Asia approaches, said Martin Senior, head of LNG pricing at Argus.
In Europe, prices fell most of the week amid comfortable supply and the prospect of a relaxation of European storage targets.
“Milder minimum temperature forecasts in north-west Europe have eased near-term heating concerns and peace talks between the United States and Russia accelerate, increasing the prospect for higher Russian pipeline flows to Europe this year,” Argus’ Senior said.
Discounts for summer deliveries have narrowed as increased inter-basin competition for summer deliveries has forced European buyers to bid slightly higher to secure delivered cargoes, he added.
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 $13.116/mmBtu on February 27, a $0.64/mmBtu discount to the April gas price at the Dutch TTF hub, marking an 8% weekly decline.
Argus assessed the price at $13.295/mmBtu, while Spark Commodities assessed the price for March delivery at $13.127/mmBtu.
The U.S. arbitrage to north-east Asia via the Cape of Good Hope for February has narrowed for the fifth week running, meaning that the incentive for U.S. cargos to go to north-west Europe instead of Asia has become much more marginal compared to the last two months, said Spark Commodities analyst Qasim Afghan.
In the LNG freight market, Atlantic LNG rates have more than tripled this week to $19,750/day on Friday, while Pacific rates rose to $14,250/day, Afgif youhan added.
American Dollar Exchange Rate