Asian LNG prices stable on weak demand
Asian spot liquefied natural gas (LNG) prices were stable this week continued muted demand from Asia amid a lockdown in China, allowing European gas prices to maintain a premium to keep LNG cargoes flowing to the continent.
The average LNG price for May delivery into north-east Asia was estimated at $33.00 per metric million British thermal units (mmBtu), unchanged from the previous week, industry sources said.
The average price for June delivery was estimated at $29.00 per mmBtu, they added.
“Europe’s TTF gas benchmark continues to retain a premium over Asian spot LNG prices, keeping flows of LNG into the bloc very strong,” said Robert Songer, LNG analyst at data intelligence firm ICIS.
“The sustained effects of this are evident even in Chinese imports, which fell 13% to a total of 16.9 million tonnes in January-March 2022, compared with the same period the year before, according to ICIS LNG Edge ship-tracking data,” he added.
In China, a lockdown due to zero-tolerance Covid-19 policy have weighed on gas demand and is proving bearish for Asian LNG prices. However, prices will likely rise once the current wave of COVID-19 infections runs its course, said Edmund Siau, LNG analyst at consultancy FGE.
Concerns about Russian gas supply in the European market are still strong and supporting prices. Payment for Russian gas in roubles by European Union buyers would break the EU’s sanctions regime against Moscow, an internal European Commission note said this week. read more
The LNG market remains tight and Europe will still need to bring in large amounts of LNG to prepare for next winter and to hit storage targets, another factor to support prices going forward, Siau added.
Europe has imported 15.4 billion cubic meters (bcm) of LNG in March, a 32% increase from the previous month, according to Refinitiv Eikon data, and is expected to continue to attract large number of volumes, especially from the United states.
“Since the start of the year, Europe has imported around 24.6 bcm of LNG from the United States, almost the total 2021 amount. The arbitrage to Asia will need to open further to attract these cargoes away from Europe,” Refinitiv gas analyst, Nnenna Amobi, said.
On the supply side, the recent restart of Shell’s 3.6 million tonnes of LNG per annum (mtpa) Prelude project will help with the tight situation in Asia, while Norway’s 4.3 mtpa Hammerfest is due to restart in May.
“Both of these coincide with the start of the northern hemisphere summer, but the extra-high storage injections now on the menu in Europe mean demand is not likely to wane much, which will keep the pressure on Asian buyers,” ICIS’ Songer said.