LONDON: Asian spot liquefied natural gas (LNG) prices eased this week as concerns about a tight market eased after the resumption of Russian gas flows via Nord Stream 1 after its 10-day maintenance.
The average LNG price for September delivery into north-east Asia was estimated at $38 per million British thermal units (mmBtu), down $2.5 or 6.2%, from the previous week, industry sources said.
“The restart of Nord Stream will have a dampening effect on LNG prices. Now that Russian gas is flowing again towards Germany -even if it is only at 40%- it would give some relief to the need of LNG imports in order to fill the (European) gas inventories in time,” said Hans van Cleef, senior energy economist at ABN AMRO.
“(However) It is expected that Russia will most likely come up with new arguments which will result in lower gas exports towards Europe during the coming weeks. On top of that, even when inventories are filled in time, European demand for LNG will remain very high during the whole winter,” he added.
In Europe, S&P Global Commodity Insights assessed LNG prices on a delivered ex-ship (DES) basis into north-west Europe (NWE) at $38.233/mmBtu on July 21, a discount of $8.95/mmBtu to September prices at the Dutch gas hub.
The competition between Europe and Asia at a time when global LNG supply is tight has recently pushed Asian LNG prices to a four-month high and close to record level seen in December at $44.35/mmBtu.
This recent decline in prices may not be sustainable, with winter pricing still remain near mid $40 levels. Edmund Siau, LNG analyst at Consultancy FGE said that while the resumption of Nord Stream 1 flows to pre-maintenance levels were roughly in line with the market’s expectations, the fears of a future supply cut remain.
In the second quarter of 2021, Europe had imported 23% of global LNG and around 8% of the global market shifted from Asia to Europe from Q2 2021 to Q2 2022, according to an LNG report by data intelligence firm ICIS.
However; S&P Global Commodity Insights said that LNG cargo prices into Europe have started to trade below North Asia derivative prices, which - on July 21- were around $40.70/mmBtu for September delivery, and around $42/mmBtu for October delivery.
“This could point to the US-North Asia arbitrage opening up, pulling Atlantic Basin LNG cargoes outside of the region, into Asia instead” S&P analysts said.
Japanese and Korean players remained active in the spot market to meet summer demand as Northeast Asian countries continue to experience above-average summer temperatures.
Korea’s KOGAS concluded a large winter strip purchase of 12 cargoes and was reportedly seeking more, according to consultancy Trident LNG.
Japan’s Nippon Steel Corp, the world’s second-largest steelmaker, recently bought an LNG shipment at the highest price ever paid in the country.