HomeNewsAsia spot LNG prices slip below $10 MMBtu despite Red Sea tensions

Asia spot LNG prices slip below $10 MMBtu despite Red Sea tensions

1/19/2024

(Reuters) - Asian spot LNG prices dipped below $10 per MMBtu for the first time in nearly eight months, as ample inventories and mild weather outweighed geopolitical tensions in the Red Sea.

The average LNG price for March delivery into north-east Asia fell to $9.50/mmBtu, down almost 6% from last week, industry sources estimated.

The fall in prices, however, has spurred more spot cargo purchases by Asian buyers.

"Lower prices have incentivized a spate of tenders and purchasing by Asian buyers — a reaction not mirrored in Europe — to help slow falls and widen the spread between northeast Asian and European delivered LNG markets," said Samuel Good, head of LNG pricing at commodity pricing agency Argus.

Pricing falls this week have been driven by weaker European gas prices, as the region looks to an exceptionally mild spell following the present cold snap, he added.

"Even with more diversions away from the Suez Canal — by Qatari and Yamal-linked carriers — from last Friday, the market has shown little reaction."

Earlier this week, the world's number two LNG exporter, Qatar, stopped sending tankers via the Red Sea amid growing regional tension, with at least three tankers changing courses to take the longer Cape of Good Hope route.

Two vessels owned by Russia's Yamal LNG also diverted away from the Red Sea.

Yemen's Iran-backed Houthi group has been attacking vessels in the Red Sea since Nov., in what the group says is an effort to support Palestinians in the war with Israel.

This part of the route accounts for about 12% of the world's shipping traffic

Meanwhile, the amount of natural gas flowing to LNG export plants in the U.S. dropped to a one-year low this week, as an Arctic freeze caused some energy firms to divert fuel to the domestic market and as Freeport LNG's facility in Texas experienced mechanical problems.

"This poses a notable risk factor if it continues for a longer period," said Siamak Adibi, director for gas and LNG supply analytics at FGE.

"However, weak demand and high storage levels are expected to counterbalance this risk factor, at least for now."

In Europe, 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 $8.286/mmBtu on Jan. 18, a $0.749/mmBtu discount to the March gas price at the Dutch TTF hub.

Argus assessed the price at $8.30/mmBtu, while Spark Commodities assessed it at $8.126/mmBtu.

On spot LNG freight rates, Atlantic rates were estimated at $57,000/day on Friday, while Pacific rates were at $59,000/day, said Qasim Afghan, an analyst at Spark Commodities.

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