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Asia spot prices ease in new year start as demand remains slow

Asian spot liquefied natural gas (LNG) prices eased for a third straight week at the start of the year, on the back of slower demand amid ample inventory levels and milder winter weather.

The average LNG price for February delivery into northeast Asia (LNG-AS) was $25 per million British thermal units (mmBtu), down $3, or 10.7%, from the previous week, industry sources estimated.

“Demand is lacking overall for spot, even with lower prices, but it has brought in some interest from South Asian players. If the downtrend continues we could see some speculative buys picking off some of the excess in the region,” said Toby Copson, global head of trading at Trident LNG.

“Near term, I expect further declines as we move into the Chinese Lunar New Year and then uptick as China gradually opens up economically and industrially.”

China, the world’s second largest LNG importer in 2022, abruptly ended its stringent zero-COVID policy last month after maintaining strict measures to curb the virus spread.

In Europe, gas prices fell earlier in the week on mild weather and high stock levels, before edging up on colder temperatures.

Northeast Asian delivered LNG prices however had fallen less sharply, said Samuel Good, head of LNG pricing at commodity pricing agency Argus, resulting in tighter discounts to or even turning to a premium over the Dutch TTF hub in some cases.

“But interest from northeast Asian buyers largely remains tepid, with many still facing ample LNG terminal inventories, limiting the number of firms willing to compete for Atlantic LNG supply,” he said.

“There has been a reaction from European delivered LNG prices though, which have tightened their discounts to the TTF considerably in the past week or so.”

S&P Global Commodity Insights assessed its daily Northwest Europe LNG Marker price benchmark, for cargoes delivered in February on ex-ship (DES) basis, at $20.573 per mmBtu on Jan. 5, a discount of $1.25 per mmBtu to the February gas price at the Dutch TTF hub, said Ciaran Roe, global director of LNG.

For cargoes delivered in March, the northeast Asia JKM derivative settled at a $0.45 per mmBtu premium to the Dutch TTF hub, and at a $1.35 per mmBtu premium to the Platts Northwest Europe LNG derivative, per assessments on Jan. 5.

“If March JKM goes $2 per mmBtu over March TTF, then Northwest Europe will struggle to import flexible LNG, and it’s likely Europe’s gas hubs would have to move higher to compete,” said Roe.

Spark’s Atlantic rate for tankers on Friday fell to $120,750 per day, while the Pacific rate declined to $135,000 per day.
Source: Reuters

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