Asian spot LNG prices fell further last week to their lowest level in 10 weeks.
This tracked Europe’s bearish gas price momentum and amid weak demand due to comfortable storage levels.
The average LNG price for April delivery into northeast Asia was at $13.50 per MMBtu, down from $14 the previous week - the lowest since 20th December, industry sources estimated to S&P Global.
“Market conditions are fragile right now. Asia is well supplied on a marginal basis, some forward strip tenders are out, but fundamentally, there is no tightness,” said Toby Copson, Chairman, Davenport Energy Partners.
“Volatility is in from potential Russian supply re-emerging and a lack of spot demand. I expect some further downside until seasonal weather draws stocks to top-up levels,” he added.
Chinese and South Korean buyers are still away from the market, due to relative comfortable storage levels and supply but cold weather in China at the start of March might see some late buyers return, said Klaas Dozeman, market analyst at Brainchild Commodity Intelligence.
Meanwhile, prices were still too high for price sensitive buyers in southeast Asia, with only a few countries active on the spot markets - Bangladesh, Thailand, Philippines.
However, the drop in prices means that the level at which Asian buyers are expected to return to the market is coming closer, Dozeman said.
Some Indian demand has picked up, with state-owned firms issuing tenders recently seeking cargoes. This also comes as the hottest part of the South Asian year approaches, said Martin Senior, head of LNG pricing at Argus.
In Europe, prices fell for most of last week amid comfortable supply and the prospect of a relaxation of European storage targets.
“Milder minimum temperature forecasts in northwest Europe have eased near-term heating concerns and peace talks between the US and Russia accelerate, increasing the prospect for higher Russian pipeline flows to Europe this year,” Argus’ Senior said.
Discounts for summer deliveries narrowed, as increased inter-basin competition for summer deliveries forced European buyers to bid slightly higher to secure delivered cargoes, he added.
S&P Global Commodity Insights assessed its daily North West Europe LNG Marker (NWM) price benchmark for cargoes delivered in April on an ex-ship (DES) basis at $13.116 per MMBtu on 27th February, a $0.64 per MMBtu discount to the April gas price at the Dutch TTF hub, marking an 8% weekly decline.
The US arbitrage to northeast Asia via the Cape of Good Hope for February narrowed for the fifth week running, meaning that the incentive for US cargoes to be shipped to northwest Europe instead of Asia has become much more marginal, compared to the last two months, said Spark Commodities analyst, Qasim Afghan.
On the LNG freight market, Atlantic LNG rates more than tripled last week to $19,750 per day on Friday, while Pacific rates rose to $14,250 per day, Afghan added.
