Asia spot prices maintain downtrend on tepid demand
(Reuters) - Asian spot liquefied natural gas (LNG) this week hit its lowest since early July 2021 as weak demand and solid inventories in northeast Asia continued to pressure prices, while Europe prepared to exit winter with record inventories.
The average LNG price for May delivery into northeast Asia <LNG-AS> was $12.50 per million British thermal units (mmBtu), down $0.50 or 3.8% from the previous week, industry sources estimated.
Prices have fallen 55% year-to-date and more than 82% from the August 2022 peak at $70.50/mmBtu.
"Despite prices hovering in the low $12s, China remains muted, signifying they appear comfortable for now," said Toby Copson, global head of trading at Trident LNG.
"If we see further declines, we could see provincial gas companies starting to bite again."
Samuel Good, head of LNG pricing at commodity pricing agency Argus, said a mild late winter, strong LNG inventories especially in South Korea, high expected nuclear availability, and the continued absence of firm Chinese spot cargo demand have curbed regional demand.
"As we step closer to the second quarter, the lack of spot market activity from buyers in China is weighing on sentiment for the second half of summer," he added.
The unusually high end-winter storage in Asia will likely suppress summer import demand for restocking ahead of next winter, according to Leo Kabouche, LNG market analyst at research consultancy Energy Aspects.
In Europe, a surprisingly mild winter has left the continent in a better-than-expected position as it heads into the re-stocking season.
"Europe's vast onshore gas storage is over 50% full, compared with levels below 25% full at the same time in the last two years. This means Europe needs a lot less gas this summer to meet storage targets ahead of next winter," said Alex Froley, LNG analyst at data intelligence firm ICIS.
"However, with less Russian pipeline gas this year, more of that gas must come as LNG. So even though storage is in better shape, we expect global competition for cargoes to continue," Froley said, expecting steady strong prices across future months.
The strikes in France made it lose at least one million tons of LNG in March, according to ICIS data, but the impact on the entire European gas system has not been major as cargoes headed to neighboring terminals.
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 $12.399/mmBtu on March 30, a $1.412/mmBtu discount to the May gas price at the Dutch gas TTF hub, according to Allen Reed, managing editor of Atlantic LNG.
Reed said that for the first time since March 10, front-month Platts NWE LNG had flipped to a premium of $0.298/mmBtu over the Asian LNG benchmark JKM on March 30.
Argus' assessment for the Northwest Europe DES LNG price was at $12.45/mmBtu on March 30.
LNG spot freight rates moved lower on growing vessel availability, with Atlantic at $44,500/day on Friday and Pacific rates at $66,250/day, according to Henry Bennett, global head of pricing at Spark Commodities.
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