Asian LNG Prices Decline Amid High Inventories, Mild Weather

MOSCOW, 7 Oct – PRIME. Spot prices for liquefied natural gas in Asia fell even more this week on the back of high inventory levels. However, a force majeure event at an LNG terminal in Malaysia raised concerns that buyers in Asia will have to look for new shipments in the face of increased competition from European consumers.

Industry sources estimate that the average price of LNG shipped to Northeast Asia in November this week was $34/MMBtu. This is $4.50, or 11.7%, down from last week.

“Prices in Asia continue to decline on the back of mild weather and declining demand ahead of winter,” said Raihana Rasidi, an analyst at Kpler.

Price cuts are “a sign that Asian countries are ready for the heating season. However, a colder-than-usual winter could lead to a rapid reduction in stocks against the backdrop of increased use of gas for space heating,” she added.

Malaysia LNG, which is majority owned by Petronas, has declared force majeure on LNG supplies to its customers due to a gas leak on the Sabah-Sarawak pipeline on 21 September. Force majeure has been declared at a time when Japan and many other countries are trying to secure gas supplies before winter.

“Spot prices have turned to strengthening on the back of news from Malaysia. This increase is associated with some improvement in investor sentiment. At the same time, Japanese traders, on the contrary, are selling LNG, while the Asian market is on a downward trend,” says Trident LNG’s Toby Kopson.

Gas prices in Europe have declined in anticipation of a meeting of EU leaders at which a price ceiling will be discussed.

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“Increasing supply costs and logistical problems in the LNG import infrastructure continue to put pressure on LNG quotes in Europe,” said FGE’s Edmund Siau.

The cost of DES-delivered LNG to NW Europe on October 6 was $27.711/MMBtu, according to S&P Global Commodity Insights. The discount to November futures for gas delivered from the TTF terminal is $22 per million Btu, Kiaran Rowe of S&P Global Commodity Insights said.

The LNG market is in strong contango, Rowe said, with futures for November and December delivery above spot prices by about $8 per million Btu.

Statistics compiled recently by ICIS showed that US LNG supplies to Europe exceeded imports of Russian LNG and natural gas for the first time.

According to ICIS, US LNG shipments to the EU and the UK totaled 5.3 billion cubic meters in September, while total natural gas imports from Russia reached only 3.7 billion cubic meters. Russian gas supplies via gas pipelines have reached a historic low of 2.2 billion cubic meters.

Spot LNG freight rates continued to rise. Freight rates for LNG tankers in the Atlantic Basin jumped 13% from the previous week to $360,750 per day as of Friday, said Henry Bennett of Spark Commodities.

“Seasonal shrinkage in the LNG market is coming early this year as companies look to book ships for winter shipping. In the same period last year, freight rates for LNG tankers in the Atlantic Basin were below $100,000,” Bennett added.