LONDON: Asian spot liquefied natural gas (LNG) prices fell for the fourth week in a row on mild weather and ample inventories, with further downward pressure expected due to the upcoming Lunar New Year holiday.
The average LNG price for February delivery into northeast Asia was $23 per million British thermal units (mmBtu), down $2, or 8%, from the previous week, industry sources estimated.
The average price for March delivery is estimated at $20.60 per mmBtu.
“Prices continue to soften with demand still relatively low. At current levels there has been some spot activity but the upcoming Asian holidays will apply downward pressure,” said Toby Copson, global head of trading and advisory at Trident LNG.
“(At) sub-$20, I see some optionality given freight is low compared to recent highs, so this makes for favourable conditions for FOB buyers looking to arbitration into Asia as it’s holding a premium,” he said.
In Europe, the start of the year has seen a decline in gas and LNG prices, partly due to a continuation of unseasonably mild weather across the continent, putting less stress on gas inventory levels and sending the benchmark gas price at the Dutch TTF hub down 14% since the end of 2022.
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“Unless we see a late winter cold snap, the market is expecting storage levels to remain healthy as we come out of winter, which should in turn limit panic around the summer restocking season,” according to Tobias Davis, head of LNG Asia at brokerage firm Tullett Prebon.
S&P Global Commodity Insights (SPGCI) assessed its daily Northwest Europe LNG Marker (NWM) price benchmark, for cargoes delivered in February on ex-ship (DES) basis, at $19.241/mmBtu on Jan. 12, a discount of $2.2/mmBtu to the February gas price at the Dutch gas TTF hub, according to Ciran Roe, global director of LNG.
“March JKM and April JKM derivatives on Jan. 12 are a minus $0.60-2/mmBtu discount to the TTF months. This has eased pressure on the European LNG differentials and means Europe isn’t being outbid for LNG at the moment,” Roe said.
Alex Froley, LNG analyst at data intelligence firm ICIS said that Europe’s gas storage is at high levels for the time of year, which few would have expected amid the supply cuts of last summer, pushing prices down across the curve for the next couple of years to the $20-25/mmBtu level.
“There may not be much further to fall in the near term, as there are already signs of increased numbers of cargoes heading to Asia and any additional drops could bring in greater competition from Asian customers, as well as increased consumption from industrial users of gas in Europe,” Froley ssid.
LNG freight rates were down as the market moves out of the peak winter period and as Freeport delays continue to free up vessels for the spot market, according to Henry Bennett, global head of pricing at Spark Commodities.
Spark’s Atlantic rate on Friday fell by 25% to $90,000/day while the Pacific rate fell by 17% to $111,750/day.
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