HomeNewsAsia spot LNG prices hit 7-month high on rising demand, Europe supply worries

Asia spot LNG prices hit 7-month high on rising demand, Europe supply worries

9/29/2023

(Reuters) - Asian spot LNG prices rose for a third week, gaining $1 to a seven-month high, amid increased demand in Asia and supply concerns in Europe.

The average LNG price for November delivery into north-east Asia <LNG-AS> rose to $15 per million British thermal units (mmBtu), up from $14 the previous week, industry sources estimated.

"As the risk of continued Australian disruption dissipates, concerns have shifted back toward Russian political risk. As gasoline and diesel exports have been curbed, there is some concern that similar measures could spread to other commodity classes," said Dominic Gallagher, head of LNG broking at Tullett Prebon.

"This, with the backdrop of supply issues in Europe, has encouraged further strength in TTF and JKM over the past week," he said, referring to Europe's main natural gas futures market the Dutch TTF gas hub, and the Japan-Korea-Marker as the LNG benchmark price assessment for spot physical cargoes in Asia.

Russia had last week temporarily banned exports of gasoline and diesel to all countries outside a circle of four ex-Soviet states to stabilize the domestic market, though later on softened the ban. It said this week it may introduce quotas on overseas fuel exports if the export ban fails to bring down high gasoline and diesel prices.

Additionally, more tendering activities in the market put upward pressure on Asian prices, said Siamak Adibi, principal consultant at energy consultancy FGE, who also expects Japanese buyers to enter the market soon.

"Japanese buyers have not shown significant activity in building up their stockpiles yet ... Our assumption is that they need to increase their inventories through spot purchase before entering cold months."

Japan's industry ministry said LNG inventories by major electricity utilities will likely increase towards the peak winter demand season, after falling to their lowest since early 2021 on the back of a long and hot summer.

In Europe, S&P Global Commodity Insights assessed its daily northwest Europe LNG Marker (NWM) price benchmark for cargoes delivered in November on an ex-ship (DES) basis at $12.487/mmBtu on Sept. 28, a $0.80/mmBtu discount to the November gas price at the Dutch TTF gas hub, said Shermaine Ang, global LNG markets lead.

Rises at the front of the LNG and gas hub curves – driven by expectations for weaker Norwegian gas supply due to upstream maintenance – have tightened inter-month price spreads considerably, as concerns of early winter gas surplus wanes, said Samuel Good, head of LNG pricing at commodity pricing agency Argus, which assessed the north-west Europe DES price at $12.30/mmBtu.

Europe gas prices rose to multi-week highs at the start of the week after an extension to Norwegian maintenance outages. Prices later on eased as some maintenance outages ended, though there were revisions in the maintenance schedule for October.

On LNG freight, spot rates fell this week, particularly in the Atlantic Basin where a narrowing of the contango between October and November closed floating storage opportunities and freeing up prompt vessels, said Edward Armitage, an analyst at Spark Commodities.

The Atlantic rates fell to $174,000/day on Friday, while the Pacific rates eased to $189,000/day.

Contango is where the futures price of a commodity is higher than the spot price.

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