Prices of Asian spot liquefied natural gas (LNG) rose slightly this week, tracking European gas prices which gained ground following the EU’s plan to phase out Russian gas, but prices are expected to ease as Chinese demand remains muted.
The average LNG price for June delivery into north-east Asia (LNG-AS) was at $11.50 per million British thermal units (mmBtu), up from $11.00/mmBtu last week, industry sources estimated.
The European Commission will next month propose legal measures to phase out the EU’s imports of all Russian gas and LNG by the end of 2027 and ban EU spot imports by the end of 2025.
In Europe, gas prices at the Dutch TTF gas hub moved higher on May 6 following the EU announcement but traded in a narrow range for the rest of the week.
“Brewing competition from across the basin, coupled with Europe’s restocking needs over the summer injection cycle, has seen prices rise over the week, and the EU announcement has added fuel to this competition,” said Aly Blakeway, manager of Atlantic LNG at S&P Global Commodity Insights.
“Despite Asian demand increasing, demand from China remained muted amid strong gas production and healthy pipeline flows. This lack of large competition was keeping the European LNG spreads relatively wide versus their natural gas counterparts,” he added.
The price rise in Europe priced out some buyers in Asia, with Chinese buyers retreating on offers for cargoes following at least two spot purchases by second-tier buyers last week, said Martin Senior, head of LNG pricing at Argus.
Prices also remain too high to stimulate significant spot demand from India, Senior added.
Arturo Regalado, senior LNG and gas market analyst at Kpler, said Asian LNG prices are expected to ease next week due to mild weather, high inventories, and seasonally soft demand.
“The recent TTF rally isn’t demand-driven. It’s policy and supply risk that’s doing the heavy lifting right now,” Regalado said, adding that residential and commercial demand are on a downward trajectory and there is limited upside for gas-fired power generation as temperatures continue to rise and amid some recovery in wind output.
S&P Global Commodity Insights assessed its daily North West Europe LNG Marker (NWM) price benchmark for cargoes delivered in June on an ex-ship (DES) basis at $11.007/mmBtu on May 8, a $0.70/mmBtu discount to the June gas price at the Dutch TTF hub.
Argus assessed the price for June delivery at $11.04/mmBtu, while Spark Commodities assessed it at $11.041/mmBtu.
The U.S. arbitrage to north-east Asia via the Cape of Good Hope remains closed while the arbitrage via Panama continues to marginally point to Asia, said Spark Commodities analyst Max Glen-Doepel.
In the LNG freight market, Atlantic rates fell to $39,000/day on Friday, while Pacific rates remained stable at $22,500/day, he added.
Source: Reuters