Asian spot liquefied natural gas (LNG) prices rose this week, gaining for the first time in nearly a month, on colder-than-expected weather in Europe and following Russian strikes on Ukrainian gas infrastructure ahead of winter.
The average LNG price for November delivery into northeast Asia was $11.00 per million British thermal units (mmBtu), up from $10.60/mmBtu last week, industry sources estimated.
The price for December delivery was estimated at $11.20/mmBtu.
“The main reason (for a price gain) is a rebound in gas demand in Europe, driven by recent weather conditions,” said Siamak Adibi, FGE director for gas and LNG supply analytics, as Europe had a colder October start with surprising, rare cold spells.
He added Europe’s gas inventory build-up has slowed down in recent days, while send-outs from regassification terminals have remained high.
“The Asian market is still weak. LNG demand in other markets like the Middle East and Latin America are also on decline in line with seasonality patterns. Europe remains key in shaping market sentiment this winter.”
In Europe, S&P Global Commodity Insights assessed its daily Northwest Europe LNG Marker price benchmark for cargoes delivered in November on an ex-ship basis at $10.327/mmBtu on October 9, a $0.63/mmBtu discount to the November price at the Dutch TTF hub.
Argus assessed the price at $10.36/mmBtu, while Spark Commodities assessed it at $10.330/mmBtu.
Due to the colder weather and the recent Russia-Ukraine escalation, which knocked out around 30% of Ukrainian gas production, withdrawals from European gas infrastructure have started in October, said Aly Blakeway, manager of Atlantic LNG at S&P Global Commodity Insights.
“With Europe’s storages over 11% lower than the levels from this time last year, Europe will need to bid higher to attract more waterborne LNG volumes over winter,” said Blakeway.
“Despite Asia continuing to remain on the sidelines, the expected pull from Central and Eastern Europe may see further support on prices as Europe looks to meet demand over winter with lower storages.”
However, Chinese demand which dropped in September and weaker-than-expected appetite from Egypt could help counterbalance extra LNG needs from colder weather in Europe, as well as possible increased flows from Europe to Ukraine after reports of damage to Ukrainian production, said Alex Froley, senior LNG analyst at ICIS.
Meanwhile, the U.S. front-month arbitrage to Northeast Asia via the Cape of Good Hope is still narrowly incentivising U.S. cargoes to be delivered to Europe, said Spark Commodities analyst Max Glen-Doepel.
In LNG freight, Atlantic rates slipped to $22,000/day on Friday, while Pacific rates eased to $24,000/day, he added.
(Reporting by Emily Chow; Editing by Vijay Kishore)