LONDON: Asian spot liquefied naturalgas (LNG) prices fell this week amid low demand during the Lunar New Year holiday in Asia, encouraging cargo diversions towards Europe where gas prices are at a 15-month high amid concerns over storage refilling.
The average LNG price for March delivery into north-east Asia was at $13.80 per million British thermal units (mmBtu), down from $14/mmBtu last week, industry sources estimated.
“Demand in Asia, particularly in China, has been weaker than the seasonal norm, which has been pulling rates down. We’re seeing some strength going in to March deliveries,” said Toby Copson, chairman at Davenport Energy Partners.
“However, overall sentiment remains muted so cargoes are being re-routed to Europe to capture premiums,” Copson added.
High prices are also discouraging price sensitive buyers in south-east Asian markets.
Global LNG: Asian spot LNG little changed on ample stocks, mild weather
“Asian LNG buyers are firmly out of the market for spot U.S. LNG cargoes, not only for next-month deliveries but also for future months,” said Natasha Fielding, head of European gas, LNG and biomass pricing at Argus.
In Europe, colder weather and higher storage withdrawals continue to concern the market.
“Higher prices in Europe encouraged a burst of LNG tankers to divert away from Asia to Europe in early January, with at least six making mid-Atlantic course changes. We saw a seventh this week, with the LNG Juno changing course from Japan to Greece,” said Alex Froley, senior LNG analyst at ICIS.
Malaysia’s Petronas said that its operations in Miri and Bintulu ports remain uninterrupted despite severe flooding, easing market concerns over LNG supply disruptions.
“All eyes are currently fixated on the last straw that could quicken the pace of European storage withdrawals and leave sites so depleted after the winter that the only way forward will be fierce competition for LNG,” said Florence Schmit, European energy strategist at Rabobank.
“Sentiment is very bullish at the moment and governments across Europe talking about subsidising storage injections during the summer only amplifies this trend,” Schmit added.
S&P Global Commodity Insights assessed its daily North West Europe LNG Marker (NWM) price benchmark for cargoes delivered in March on an ex-ship (DES) basis at $15.31/mmBtu on Jan. 30, a $0.47/mmBtu discount to the March gas price at the Dutch TTF hub.
Argus assessed the price at $15.26/mmBtu, while Spark Commodities assessed the price for February delivery at $15.339/mmBtu.
The U.S. arbitrage to north-east Asia via the Cape of Good Hope for February has slightly narrowed, but still strongly signals that U.S. cargoes are incentivised to deliver to Europe rather than Asia, said Spark Commodities analyst Qasim Afghan.
Global LNG freight rates fell to new record lows this week as Atlantic rates dropped to $3,500/day on Friday, the lowest on record as increased vessel availability continue to apply downward pressure on rates. Pacific rates also droppped to $11,500/day, Afghan added.
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