LONDON: Asian spot liquefied natural gas (LNG) prices declined this week on soft demand and strong storage inventories and as markets awaited the outcome of a meeting between U.S. President Donald Trump and Russian leader Vladimir Putin later today.
The average LNG price for September delivery into north-east Asia was at $11.65 per million British thermal units (mmBtu), down from $11.90/mmBtu last week, industry sources estimated.
The contract for October delivery was estimated at $11.45/mmBtu.
“This (meeting) may not only be decisive for Ukraine but also for the fate of Russian sanctions and economic development between the two nations. It may not be surprising if Russia would open discussion on Arctic LNG 2, as it’s clearest link to LNG markets,” said Klaas Dozeman, market analyst at Brainchild Commodity Intelligence.
Sanctioned by the United States, Russia’s 19.8 million tons per annum (mtpa) Arctic LNG 2 terminal has had two of its threetrains installed and could quickly add to global supply if sanctions were loosened.
Conversely, Russia’s Yamal and Sakhalin LNG export terminals export about 30 mtpa and could be subject to future sanctions if those were bolstered, said Martin Senior, head of LNG pricing at Argus.
Global LNG: Asian spot prices inch up on geopolitical, supply concerns
Geopolitics remain the wild card, said Arturo Regalado, senior LNG analyst at Kpler.
“A lack of progress could reignite concerns over tighter sanctions on Russian energy, as well as potential secondary U.S. tariffs on Russian oil and gas buyers,” he said.
While the weather has turned a slightly hotter again in Asia it has not attracted major spot purchases – partly due to the pressure on oil prices – which meant oil-indexed long term LNG contracts became competitive against spot purchases, Dozeman said.
Argus’ Senior said that some Chinese demand has emerged, with Beijing Gas buying two cargoes below $12/mmBtu. The firm last year said that it viewed $12/mmBtu and above as too expensive for LNG imports.
Prices are seen lower next week as high Chinese inventories continue to keep north-east Asian spot demand soft, with stable Pacific supply and seasonal temperatures adding to the bearish tone, said Kpler’s Regalado.
In Europe, gas prices at the Dutch TTF hub were trading in a narrow range on Friday with heatwave across the continent was starting to ease and as markets focused on the Trump-Putin meeting.
S&P Global Commodity Insights assessed its daily North West Europe LNG Marker (NWM) price benchmark for cargoes delivered in September on an ex-ship (DES) basis at $10.582/mmBtu on August 14, a $0.415 /mmBtu discount to the September futures price at the TTF hub.
Argus assessed the price at $10.540/mmBtu, while Spark Commodities assessed it at $10.534/mmBtu
The U.S. arbitrage to north-east Asia via the Cape of Good Hope is still incentivising U.S. cargos to deliver to Europe. Similarly, the arbitrage via Panama is pointing to Europe, said Spark Commodities analyst Qasim Afghan.
Global LNG freight rates remained relatively steady, with the Atlantic rates assessed at $36,000/day and Pacific rates at $33,250/day, Afghan added.
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