LONDON: Asian spot liquefied natural gas (LNG) prices rose slightly this week, as colder weather forecasts in north-east China lifted buying interest, despite strong storage inventories.
The average LNG price for December delivery into north-east Asia LNG-AS was $11.10 per million British thermal units (mmBtu), up from $11.00/mmBtu last week, industry sources estimated.
“With the first heating demand arriving in parts of China and the confirmation that La Nina has emerged there was some buying appetite among Asian customers,” said Klaas Dozeman, market analyst at Brainchild Commodity Intelligence.
La Nina, which involves the cooling of temperatures in the central and eastern Pacific Ocean, could increase winter heating demand but is not expected to be strong or long-lived, he added.
While Chinese trade data showed a modest rebound in imports and exports, underlying economic weakness persists amid falling producer prices and markets are braced for potential volatility ahead of a Nov. 10 deadline for U.S.-China trade, Dozeman said.
There have been a smattering of spot tenders in Asia for spot cargoes from price sensitive buyers, but South Korean demand has been weak in particular, with high inventories following strong coal burn in recent months leading to 8-year low import levels for the first half of October, said Martin Senior, head of LNG pricing at Argus.
In Europe, gas prices edged lower on Friday as strong output from wind farms curbed demand for gas, and supply was stable.
“Spot gas prices at the TTF have held relatively steady over the week, with the market overall on a gentle downtrend in the longer-term while waiting to get deeper into winter for a clearer view on the seasonal outlook,” said Alex Froley, senior LNG analyst at data intelligence firm ICIS.
Weather remains a key risk factor in Europe.
The market seems to be repositioning itself ahead of winter, with EU storage levels at a deficit to the 5-year average and greater potential for increased gas demand from Ukraine re-introducing some upside risks, said Florence Schmit, energy strategist at Rabobank.
In anticipation of higher winter prices, hedge funds reversed recent selling in TTF futures by opening new long positions, while commercial players opened new short bets in TTF futures as a means of locking in profitable future sales against physical inventory, said independent gas analyst Seb Kennedy.
S&P Global Commodity Insights assessed its daily North West Europe LNG Marker (NWM) price benchmark for cargoes delivered in December on an ex-ship (DES) basis at $10.581/mmBtu on October 16, a $0.53/mmBtu discount to the December futures price at the TTF hub.
Argus assessed the price at $10.550/mmBtu, while Spark Commodities assessed the October price at $10.440/mmBtu.
The U.S. front-month arbitrage to north-east Asia via the Cape of Good Hope is currently marginally pointing to Europe, said Spark Commodities analyst Qasim Afghan.
Global LNG freight rates in the Atlantic saw the largest week-on-week increase since June at $29,500/day. Pacific rates fell for the eighth week running to $23,500/day, he added.
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