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Asian prices fall on lukewarm demand, ample inventories

Asian spot LNG prices fell this week as demand remained lukewarm amid ample stock levels and a mild temperature forecast, helping to maintain a steady flow of cargoes heading to Europe.

The average LNG price for February delivery into Northeast Asia fell to $32.60 per metric MM British thermal units (mmBtu), down $1.70 or 4.95% from the previous week, industry sources said. 

The price for March delivery was estimated at around $25.00 per mmBtu, they added.

"Reasonable stocks in Asia and strong output from U.S. plants are allowing a large amount of U.S. LNG to continue heading to Europe, helping offset lower pipeline flows from Russia," said Alex Froley, LNG analyst at data intelligence firm ICIS. 

Europe has attracted more than 10 MM tons of LNG across December and month-to-date in January, according to Rystad Energy. 

The arrival of several LNG gas tankers into Europe has helped to ease prices and supply concerns over reverse flows from Germany to Poland via the Yamal-Europe pipeline for 25 successive days so far. 

"This is the most dynamic winter we have ever seen for LNG and global gas markets. It has been a tug-of-war between a well-stocked and well-balanced East Asian LNG market and an extraordinarily tight European gas market," said Tamir Druz, managing director at Capra Energy Group. 

"We have never seen such a prolonged and substantial premium in (Dutch) gas over north-east Asian LNG prices. Overall, we expect the market to continue trading within a wide, yet high range, with short-term dynamics like weather playing a deciding role in guiding weekly direction," he added. 

Dutch gas prices rose on Friday morning on a colder weather outlook until mid-February and lower Norwegian flows.

The market volatility has allowed some extraordinary voyages in the LNG market: the Hellas Diana tanker from the U.S. went halfway across the Pacific towards Asia before reversing course to head to the UK instead. It ended up crossing the Panama Canal twice in one voyage, Froley said. 

"Although the situation has eased, it could still worsen again if there were cold snaps in the remaining months of winter, or disruptions to pipeline supplies to Europe," he added. 

Pacific LNG freight spot rates fell to their lowest level in nine months at $43,750 per day on Friday, while Atlantic rates fell to $30,250 per day, also a nine-month low, according to Henry Bennett at data intelligence firm Spark Commodities. 

Elsewhere, Thailand's PTT is seeking four LNG cargoes for delivery between January 27 and February 23 on a delivered ex-ship basis, traders said. 

Copyright © 2019. All market data is provided by Barchart Solutions. Futures: at least a 10 minute delay. Information is provided 'as is' and solely for informational purposes, not for trading purposes or advice. To see all exchange delays and terms of use, please see disclaimer.

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Editorial Comment
-Adrienne Blume
With Henry Hub (HH) natural gas prices almost twice as high year over year, as of the time of writing in late October, and similarly record-high prices in Europe and Asia driving competition for LNG, the gas market is rife with tension.
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