Asia spot prices jump following further Nord Stream cuts
Asian spot liquefied natural gas (LNG) prices jumped this week, after further reductions by Russia to Nord Stream 1 flows renewed concerns over market tightness, as buyers compete for cargoes to meet summer demand in Asia and maintain stock build in Europe.
The average LNG price for September delivery into north-east Asia LNG-AS was estimated at $42.5 per million British thermal units (mmBtu), up $4.5 or 11.8% from the previous week, industry sources said.
“The near-record high gas prices have been driven largely by the sudden tightness in the market after Nord Stream 1 flows reduction, pushing European buyers to rely on more LNG imports, aside from gas-saving measures, to meet restocking requirements ahead of winter,” said Ryhana Rasidi, gas and LNG analyst at data and analytics firm Kpler.
“There is very little downside for prices since we don’t expect significant LNG capacity to be added this year to help offset weaker Russian pipeline supplies to Europe,” she said.
With limited global supply, the reduction pushed some bids in Asia to break through the $52/mmBtu range, however, this abated quickly and bids round the week were in the low $40s, according to Toby Copson, global head of trading and advisory at Trident LNG.
European gas prices at the Dutch TTF hub hit a four-month high following Russian gas cuts and now hover near 195 euros per megawatt-hour (MWh).
“These prices are a manifestation of fears that European storage will not be full enough as winter starts, especially given new German storage targets,” said Robert Songer, LNG analyst at data intelligence firm ICIS.
Germany has introduced new targets for gas storage build, at 75% by Sept. 1, 85% by Oct. 1 and 95% by Nov. 1.
S&P Global Commodity Insights assessed LNG prices on a delivered ex-ship (DES) basis into north-west Europe (NWE) at $45.763/mmBtu on July 28, a discount of $14.05/mmBtu to August TTF prices, said Ciaran Roe, global director of LNG.
LNG cargo prices into Europe are trading above North Asia derivative prices, which for October were around $43.765/mmBtu on July 28, Roe said.
On Friday, Russia’s Sakhalin Energy Investment Co asked its LNG customers to pay for supplies via a Moscow unit of a European bank, a source familiar with the matter told Reuters.
The energy company was in discussions to switch payment currencies away from U.S. dollars for supply contracts. The alternative currencies being discussed included the Chinese yuan, the Japanese yen and South Korean won, a second source said.
The move, which will mainly affect Japan as well as Shell , was “priced in at this stage”, according to Toby Copson.
In the freight market, LNG freight spot rates continued to decline on enhanced vessel availability, particularly in the Atlantic basin where rates were estimated by Spark Commodities at $35,500 per day, compared with Pacific rates at $45,000 per day on Friday.