Global LNG: Asian spot LNG gains amid colder weather, stronger Europe gas prices

SINGAPORE: Asian spot liquefied natural gas (LNG) prices rose this week to their highest level of the year so far, tracking gains in European gas and amid colder temperatures in both regions.

The average LNG price for January delivery into northeast Asia rose to $14.60 per million British thermal units (mmBtu), industry sources estimated.

“This week’s further escalations between Russia and Ukraine have returned a steep risk premium to European gas and by default Asia’s JKM market, despite actual gas supplies being uninterrupted,” said Florence Schmit, energy strategist at Rabobank London, of the Asian Japan-Korea-Marker benchmark.

European benchmark gas prices at the Dutch TTF hub have been trading at one-year highs on concerns over Russian gas supply and as cold temperatures reduced gas stockpiles.

Russia’s Gazprom last weekend halted gas supplies to Austrian gas importer OMV in a dispute over payments, while Russia’s war with Ukraine intensified.

While the risk of Europe losing more Russian gas has lifted the TTF consistently above the JKM market for the first time since end-2022, the spread remains narrow and could turn back to a JKM premium in the short-term if Russian flows continue and the situation stabilizes, added Schmit.

Global LNG: Asian spot LNG slips on tepid demand, ample supply

“But given the intensification of fighting this week we could equally see the TTF maintain its premium over the JKM for a while as Europe scrambles to import LNG cargoes. Either way, markets will be higher for longer.”

At least five LNG cargoes have diverted from Asia to Europe on higher gas prices after Gazprom halted supplies to OMV. But northeast Asian delivered markets have risen in competition with Europe, with at least one diverted carrier appearing to have switched back to head for Asia again, said Samuel Good, head of LNG pricing at commodity pricing agency Argus.

In Japan, while lower temperatures have recently led to higher gas consumption and power prices, nuclear restarts could reduce reliance on gas-fired power generation and ease LNG demand, said Rystad Energy in a note.

It added that the Japan Meteorological Agency still forecasts a 50-60% probability of above-average temperatures until Nov. 29.

Meanwhile, S&P Global Commodity Insights assessed its daily North West Europe LNG Marker (NWM) price benchmark for cargoes delivered in January on an ex-ship (DES) basis at $14.800/mmBtu on Nov. 21, a $0.25/mmBtu discount to the January gas price at the Dutch TTF hub.

Argus assessed the price at $14.790/mmBtu, while Spark Commodities assessed the December delivery price at $14.635/mmBtu.

In LNG freight, Atlantic rates fell to $15,500/day on Friday, wiping out gains made in the last two weeks, said Spark Commodities analyst Qasim Afghan. Pacific rates declined to $23,000/day.