SINGAPORE: Asian spot liquefied natural gas (LNG) prices eased slightly this week on solid inventories, but restocking activities ahead of winter are expected to limit further declines.
The average LNG price for December delivery into Northeast Asia was $31 per million British thermal units (mmBtu) this week, down $1.50, or 4.6%, from the previous week, industry sources estimated.
“Asian prices had appeared to be on the decline but have seen a sudden rebound in the last two days … (due to) a 44% jump in LNG imports to Northeast Asia this week, suggesting a ramp-up in restocking for winter,” said Ryhana Rasidi, gas and LNG analyst at data analytics firm Kpler.
In China, state-owned gas importers were instructed to stop reselling cargoes to buyers in Europe and Asia to ensure sufficient supplies for winter.
Spot activity saw a Korean end-user purchasing several cargoes for December and January delivery, while Japanese utilities were involved in sales of late-December cargoes, at slight premiums to the JKM (Japan Korea Marker benchmark) monthly average, according to Ciaran Roe, global director of LNG at S&P Global Commodity Insights.
In Europe, S&P assessed its daily DES Northwest Europe LNG price benchmark, for cargoes delivered in December on ex-ship (DES) basis, at $29.873/mmBtu on Oct. 20, a discount of $13.50/mmBtu to the December gas price at the Dutch TTF hub.
“Floating LNG carriers off the coast of Europe are pressuring prompt LNG cargo values, which for November deliveries to European terminals are in the teens per mmBtu,” Roe said.
“The contango between November and December values is significant, with European LNG cargo prices for December remaining competitive against Asia for U.S.-origin LNG, even accounting for the surging spot freight costs.”
Contango is where the futures price of a commodity is higher than the spot price.
Around 35 ships carrying LNG have been drifting off the coast of Spain and around the Mediterranean due to a lack of slots to unload, exposing Europe’s lack of regasification capacity.
“Right now, it makes sense to wait in Europe due to the contango. What is unlikely for now is re-routes to Asia as prices are lower than in Europe and freight is astronomical and wouldn’t be offset,” said Toby Copson, global head of trading and advisory at Trident LNG.
European players are closely monitoring any disruption from Nigeria LNG (NLNG) after it declared force majeure due to widespread flooding.
Lee Ken Kiat, senior analyst for gas and LNG at consultancy FGE, said the market should expect a further upside risk for prices if the outage is prolonged and if there was any delay in the partial restart of U.S. Freeport LNG, which halted operations in June after an explosion and fire.
On LNG freight, spot rates in both the Atlantic and the Pacific basins hit new record highs as the market tightened further, with the Atlantic rate gaining $56,750 to $482,500/day and the Pacific rate rising $34,500 to 427,000/day, according to Henry Bennett, global head of pricing at Spark Commodities.
Comments
Comments are closed.