Asia spot LNG rises on stronger demand, risk of supply disruptions
Asia spot liquefied natural gas prices rose this week on stronger demand from China and India, and amid supply disruption risks linked to industrial action in Australia and reduced output from maintenance activity elsewhere.
The average LNG price for July delivery into northeast Asia LNG-AS was estimated at $18.80 per million British thermal units (MMBtu), industry sources said, up from $18.20/MMBtu last week.
"In Asia, price strength is supported by stronger restocking in China, where inventories remain below seasonal norms into June, and increased summer cooling demand in India," said Kpler analyst Nelson Xiong.
"While comfortable Japanese stocks and strong South Korean nuclear and coal generation limit some demand upside, Pacific supply faces risks from industrial action at Australia's Ichthys LNG plant - with potential escalation on June 11 - and ongoing maintenance at Malaysia's Bintulu facility."
Workers began a limited strike this week at Inpex's Ichthys LNG facilities in Australia over a wage dispute, and their unions threatened much broader action next week that could disrupt LNG production and loadings.
There is also prompt demand in India and Bangladesh to replace lost Middle Eastern supply. Pakistan has sought its first cargo since early May as Qatari transit through the Strait of Hormuz to Pakistan has slowed, said Martin Senior, head of LNG pricing at Argus.
In Europe, S&P Global Energy assessed its daily northwest Europe LNG marker price benchmark for cargoes delivered in July on an ex-ship (DES) basis at $16.549/MMBtu on June 4, a $0.075/MMBtu discount to the price at the TTF hub.
Argus assessed the price at $16.51/MMBtu, while Spark Commodities assessed it at $16.497/MMBtu.
"The European LNG market continued to exhibit weak spot activity, as narrow LNG gas spreads failed to incentivize buying," said Aly Blakeway, manager of Atlantic LNG at S&P Global Energy.
Conflict in the Middle East, a string of maintenance operations across North America and Trinidad and Tobago, and stronger competition for cargoes have tightened availability in the Atlantic Basin, Blakeway added.
"Stronger demand from Asia has remained a key driver... Encouraging portfolio players to divert cargoes away from Europe toward higher value markets. Additional pull from regions such as Egypt, Turkey and India has reinforced this trend."
In LNG freight, Atlantic rates fell to $101,250/day, while Pacific rates held steady at $79,500/day, said Spark Commodities analyst Qasim Afghan.
While the U.S. front-month arbitrage to Northeast Asia via the Cape of Good Hope briefly closed out and was pointing to Europe for the first time in a month on Monday, it has since marginally opened up to Asia again, he added. The U.S. front-month arbitrage to Northeast Asia via Panama is firmly pointing to Asia.
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