HomeNewsAsia spot LNG prices notch up amid spot buys, easing Japan inventories

Asia spot LNG prices notch up amid spot buys, easing Japan inventories

9/22/2023

(Reuters) - Asian spot LNG prices rose $1 this week due to buying activity by China and India, easing inventory levels in Japan and higher oil prices.

The average LNG price for November delivery into north-east Asia <LNG-AS> rose to $14 per million British thermal units (mmBtu) from $13 the previous week, industry sources estimated.

China's Unipec, the trading arm of top Asian refiner Sinopec, bought over 30 LNG cargoes via a tender for deliveries from October 2023 to the end of 2024 to meet winter demand and boost its trading supply pool.

Meanwhile, India's largest gas distributor, GAIL, issued a tender seeking an LNG cargo for October delivery.

"The support in Asian prices was due to a combination of factors including the latest LNG buying activity from Unipec and GAIL, (and) lower LNG inventories among Japanese major power utilities," said Ryhana Rasidi, gas and LNG analyst at data and analytics firm Kpler.

According to data released by Japan's Ministry of Economy, Trade and Industry (METI), LNG inventories held by major Japanese power utilities fell to 1.62 million tons as of Sept. 17, lower than the 5-year average for the period.

The ease in stockpiles was driven by hot weather, said Rasidi, adding that Japan's meteorological agency has forecast a 70% or more probability of above-average temperatures over the next week and into most of October.

Higher oil prices may set a temporary floor for LNG prices despite bearish pressure from the strike resolution at Chevron's facilities in Australia, said Rystad Energy analyst Andre Nilsen.

"If oil prices remain high or keep increasing for an extended period, we expect this will act as a bullish factor for gas prices... at the very least, to act as a price floor for gas, preventing further declines."

An Australian union alliance on Friday called off strikes at Chevron's two major LNG projects - responsible for about 7% of global supply - after agreeing to resolve disputes, ending two weeks of strike activity which had spurred concerns of supply disruption.

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 $12.864/mmBtu on Sept. 21, a $0.825/mmBtu discount to the November gas price at the Dutch TTF gas hub.

"European LNG prices slid on the back of easing supply tightness in Norway as gas production restarted at the 125 million cubic meters per day Troll A platform," said global LNG markets lead Shermaine Ang.

Gas production at Norway's Troll A platform in the North Sea resumed on Wednesday following extended maintenance, with full output expected over the next several days as pipelines gradually fill up, operator Equinor said.

While much of the Atlantic market has been focused on Norwegian gas supply to Europe over the coming couple of months, weather forecasts for much of northwest Europe suggest a mild start to the winter, said Samuel Good, head of LNG pricing at commodity pricing agency Argus.

"(This) could limit any early winter heating demand as the regions' underground gas stocks edge closer and closer to their respective capacities," he said, adding that Argus assessed the north-west Europe DES price at $12.85/mmBtu.

Meanwhile, spot LNG freight rates continued to rally this week, said Edward Armitage, an analyst at Spark Commodities, with the Atlantic and Pacific rates climbing to $197,750/day on Friday.

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