Asian spot LNG prices inch up on emerging Chinese demand

(Reuters) - Asian spot LNG prices inched up this week as temperatures below seasonal normal levels in China pushed buyers back into the market, especially as prices had recently fallen below that of some oil-linked contracts.

The average LNG price for April delivery into north-east Asia LNG-AS rose to $8.60 per million British thermal units (mmBtu), a level last seen in late April 2021, from $8.30 the previous week, industry sources estimated.

"This week, we've seen Chinese LNG imports being supported by chilly weather, especially in the southern regions," said Ryhana Rasidi, LNG analyst at data analytics firm Kpler.

"There is also the potential for emerging spot demand to keep imports lifted in the weeks ahead as spot prices have fallen below some oil-linked contracts," she added.

Overnight temperatures for north-east China are forecast to remain below seasonal norms through the second half of March — later than the typical mid-March end to the region’s heating season, said Samuel Good, head of LNG pricing at commodity pricing agency Argus said

Good added that the Chinese demand that emerged this week is largely for deliveries later this year and into 2025 and from regional firms.

In Europe, gas storage remains at record highs for the time of year. Continued weak industrial demand and abnormally mild weather are leaving the market comfortably positioned for the rest of the winter and thereby reducing storage injection demand for the summer ahead, said Alex Froley, senior LNG analyst at data intelligence firm ICIS.

"The market’s looking pretty well-supplied at the moment and for the summer ahead but it doesn’t look like it will be slipping to 2020 pandemic levels anytime soon," Froley said.

S&P Global Commodity Insights assessed its daily Northwest Europe LNG Marker (NWM) price benchmark for cargoes delivered in April on an ex-ship (DES) basis at $7.962/mmBtu on March 7, a $0.40/mmBtu discount to the April gas price at the Dutch TTF hub.

Argus assessed the price at $7.950/mmBtu, while Spark Commodities assessed it at $7.861/mmBtu.

Meanwhile, continued tensions in the Red Sea have strengthened the East Mediterranean's premium to north-west Europe. With Qatari cargoes bypassing the Suez Canal in favour of the longer route through the Cape of Good Hope, the added voyage time has forced East Mediterranean countries to pay a higher premium for spot cargoes, S&P said.

In the United States, U.S. natural gas futures dropped about 6% to a one-week low on Thursday on smaller-than-usual storage withdrawals last week when warmer-than-normal weather kept heating demand low.

Spot LNG freight rates continued to trade in a tight range, with Atlantic rates estimated at $50,250/day on Friday, and Pacific rates at $51,500/day, said Qasim Afghan, an analyst at Spark Commodities.

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