Asian spot Liquefied Natural Gas (LNG) prices fell slightly this week, tracking European gas prices, amid muted Chinese demand but they remained above $12.00 for the eighth week running.
The average LNG price for August delivery into north-east Asia <LNG-AS> was at $12.10 per million British thermal units (mmBtu), industry sources estimated, down from $12.20/mmBtu the previous week, industry sources estimated.
Prices for September delivery were estimated at $11.80/mmBtu.
“Increased hydro(power) availability in China is pressuring demand, while economic indicators like inflation and producer prices are also not supportive of enhanced growth for the second half of the year,” said Klaas Dozeman, market analyst at Brainchild Commodity Intelligence.
Dozeman said that the newest outlook for the La Nina weather pattern, which is characterised by cold temperatures in the Pacific Ocean during July-September, has weakened for the third consecutive month.
“A weaker La Nina typically decreases the need for winter restocking and decreases the risk of high gas demand in the U.S. and Asia, though major risk remains as any late summer heat in Asia might increase this need for LNG,” he added.
In general, the Asia region remains balanced with rising temperatures in north-east Asia, and continuing monsoons in south and south-east Asia lowering the need for gas-fired power generation, said Charles Costerousse, Senior LNG analyst at Kpler.
In Japan, high temperatures have added some upward pressure, with extra power demand and additional thermal power plants drawn into action. LNG stocks in terminal tanks have dropped as a result, said Alex Froley, Senior LNG analyst at ICIS.
In Europe, underground stocks remain seasonally strong and strong renewables generation compared to last year has suppressed gas demand, while strong Norwegian supply has suppressed spot LNG buying, said Martin Senior, Deputy Head of LNG pricing at Argus.
S&P Global Commodity Insights assessed its daily North West Europe LNG Marker (NWM) price benchmark for cargoes delivered in August on an ex-ship (DES) basis at $9.824/mmBtu on July 11, a $0.85/mmBtu discount to the August gas price at the Dutch TTF hub.
Argus assessed the August delivery price at $9.80/mmBtu, while Spark Commodities assessed it at $9.755/mmBtu.
In the United States, the market is closely monitoring the restart of U.S. Freeport LNG production, which has protectively shut down operations due to Hurricane Beryl.
U.S. LNG export company Freeport’s plant in Texas started pulling in small amounts of natural gas on Thursday, according to LSEG data.
“Traders will have to factor in the potential for further storms later in the season which runs until November. One past example of difficulties was after Hurricane Laura at the end of August 2020 that led the Cameron LNG plant to shut for large parts of September and October,” ICIS’ Froley said.
Following nine weeks of significant freight rate increases, the Atlantic rates decreased to $88,250/day on Friday. Meanwhile, the Pacific rates rose to $56,750/day, its highest level since February, said Spark Commodities analyst Qasim Afghan.
Source: London South East
