Global LNG: Asia spot LNG prices fall amid full inventories, mild weather

LONDON: Asian spot liquefied natural gas (LNG) prices fell this week as full inventories and warm weather helped mitigate concerns over new U.S. sanctions on Russia’s Arctic LNG 2.

The average LNG price for December delivery into north-east Asia fell 3% to $16.5 per million British thermal units (mmBtu), industry sources estimated.

“Prices have failed to find support this week despite a few potentially bullish triggers, including the new sanctions on Arctic LNG 2 and increasing Panama (canal) restrictions,” said Jake Horslen, senior LNG analyst at consultancy Energy Aspects.

“This is a testament to how bearish the short-term fundamental picture is because of the recent mild weather in Asia and high gas stocks in both basins. The forecast next week in Northeast Asia looks much colder, but LNG stocks currently offer a decent buffer.”

Toby Copson, head of energy, APAC, at broker Marex said the market will keep an eye on what’s going on is Australia – where an electrical incident at Chevron Australia’s Gorgon gas facility has left one LNG production train producing at 80% capacity - and how that might affect supply and on what the weather might do over the short term given recent warmer temperatures for the heating season.

Global LNG: Asia spot LNG prices fall amid full inventories, mild weather

Samuel Good, head of LNG pricing at commodity pricing agency Argus highlighted the emergence of additional prompt supply in the form of new spot supply offered from liquefaction terminals in the Pacific and supply originating from the Atlantic and the Middle East marketed for delivery to Asia.

Good added cold snaps over this weekend and early next week are forecast in both Seoul and Tokyo; however, Seoul is forecast for comparatively mild weather well into December, suggesting scope for weaker South Korean heating demand until at least the end of this year.

In Europe, 99.6% full storage and mild weather is forecast to last through year-end leave little incentive for withdrawals until early 2024.

“European stocks are effectively full and little in the way of cold weather in Europe has left the market asking where our new range will be found,” said Dominic Gallagher, head of LNG broking at Tullett Prebon.

Hans Van Cleef, chief energy economist at PZ – Energy Research & Strategy said although the current market is pretty calm, it is difficult to tell whether this is enough to bridge the winter and end up in a comfortable starting position when the inventories need to be refilled again in April.

S&P Global Commodity Insights assessed its daily northwest Europe LNG Marker (NWM) price benchmark for cargoes delivered in December on an ex-ship (DES) basis at $14.565/mmBtu on Nov. 9, a $0.85/mmBtu discount to the December gas price at the Dutch TTF hub.

Argus assessed the price at $14.625/mmBtu, while Spark Commodities assessed it at $14.289/mmBtu.

Spot LNG freight rates continued to rise albeit at a smaller rate, with the Atlantic rates rising to $165,750/day on Friday while the Pacific rate rose to 152,500/day, said Qasim Afghan, an analyst at Spark Commodities.