LONDON/SINGAPORE: Asian spot liquefied natural gas (LNG) prices inched down this week on tepid demand, even as supply concerns deepened after workers at Chevron’s Australia LNG projects went on strike on Friday.
The average LNG price for October delivery into north-east Asia slipped to $12.90 per million British thermal units (mmBtu) from $13 in the previous week, industry sources estimated.
“Asian demand still remains tepid, spot pricing and front month have dropped this week,” said Toby Copson, global head of trading at Trident LNG.
“However we still have a strong contango going into winter months, partially pricing in supply disruptions which should see North Asian players starting to test the waters as temperatures begin to come off and we go into heating season.”
A contango market structure means that front-month prices are below that of later-delivery contracts.
Workers at Chevron’s LNG facilities in Australia went on strike on Friday after mediation talks over wages and working conditions ended without a deal, potentially disrupting output from facilities that account for over 5% of global supply.
Some demand, however, has emerged from India, said Samuel Good, head of LNG pricing at commodity pricing agency Argus, likely in response to hot weather that is supporting power sector gas demand.
“But this is set to be short-lived as this demand wanes, with buyers understood to be happy to wait in case spot prices fall from present levels.”
In Europe, S&P Global Commodity Insights assessed its daily north-west Europe LNG Marker (NWM) price benchmark for cargoes delivered in October on an ex-ship (DES) basis at $9.827/mmBtu on Sept. 7, a $0.50/mmBtu discount to the October gas price at the Dutch TTF gas hub, said Allen Reed, managing editor at Atlantic LNG.
“The Atlantic market has continued to be price sensitive to news on the potential Australian strikes,” he said.
“European traders have said the potential for such a significant supply disruption has been the primary driver of Atlantic LNG price.”
Argus assessed the north-west Europe DES price at $9.825/mmBtu, while Spark Commodities assessed it at $9.731/mmBtu.
Hans Van Cleef, chief energy economist at PZ - Energy said that price volatility could “arise anytime based on future supply expectations.”
“After October, prices would normally rise again in order to attract more LNG inflow in Europe, in order to prevent inventories from declining too fast,” he said.
“The less we use the gas inventories, the better the starting position for next years gas markets will be.”
Meanwhile, spot LNG freight rates rose again this week, with Atlantic rates climbing to $160,000/day on Friday, while Pacific rates gained to $167,250/day, said Henry Bennett, head of pricing at Spark Commodities.
“The market is tightening ahead of the winter as demand for vessels increases, with the arbitrage to send U.S. cargoes to Asia open and floating storage economics for Europe positive for October,” he said.