Global LNG: Asia spot prices rise for third straight week on cold-weather demand

SINGAPORE: Asia spot liquefied natural gas rose for a third week on Friday to hold at a nine-week high, as colder temperatures lifted heating demand in the Northern Hemisphere and as U.S. export loadings eased earlier this week.

The average LNG price for March delivery into Northeast Asia was estimated at $11.60 per million British thermal units (mmBtu), up from $11.35/mmBtu the previous week, industry sources said.

“Prices are under upward pressure for both TTF and JKM,” said Siamak Adibi, director for gas and LNG supply analytics at consultancy FGE, referring to benchmark prices at the Dutch TTF gas hub and the Japan-Korea-Marker.

“Europe is experiencing higher year-on-year gas demand, and while LNG send-out remains robust, high storage withdrawals are putting growing pressure on the system,” he said, adding that stronger Henry Hub prices are having an indirect impact on spot LNG.

Global LNG: Asia spot prices rise as cold weather forecasts lift demand

U.S. natural gas futures surged 140% over the past seven trading days as an Arctic blast spiked heating demand, freezing oil and gas wells and cutting gas output to a two-year low.

While U.S. LNG supply is returning to normal following disruptions, particularly at Sabine Pass and Freeport, flows have not fully recovered as of January 29, Adibi added.

The extreme cold in the U.S. also prompted unusual moves in the global LNG fleet, said Alex Froley, senior LNG analyst at consultancy ICIS, with several cargoes drawn towards North American facilities to meet heating demand.

At least three cargoes from Australia and Canada are also heading towards Europe and the Americas instead of their usual Asia destination.

In Europe, S&P Global Energy assessed its daily Northwest Europe LNG Marker (NWM) price benchmark for cargoes delivered in March on an ex-ship (DES) basis at $12.505/mmBtu on January 29, a $0.94/mmBtu discount to the price at the TTF hub.

Argus assessed it at $12.380/mmBtu, while Spark Commodities assessed the February price at $13.374/mmBtu.

Looking ahead, European gas prices should ease back as the short-term cold snap ends, although low storage levels at winter’s end will require a steady draw of cargoes across summer to replenish stocks, said ICIS’s Froley.

“However, there will be new supply to help meet that need, including from Golden Pass due to start in the coming months.”

Meanwhile, the selloff of TTF short positions accelerated last week amid the intense winter price spike, said independent gas analyst Seb Kennedy, adding that the number of investment funds trading TTF futures dropped by about 5% as short position holders were squeezed out by the intense price rally.

In LNG freight, Atlantic rates further fell to $11,250/day, while Pacific rates declined to $30,500/day, said Spark Commodities analyst Qasim Afghan.

The U.S. front-month arbitrage to Northeast Asia via the Cape of Good Hope closed out further this week, driven by continuing falls in the JKM-TTF spread, he added.