Asian LNG Prices Reach Highest Levels in Months
Asian spot LNG prices have climbed to their highest point in over seven months, driven by European market gains and concerns about potential supply disruptions. As of now, the average price for LNG deliveries to north-east Asia in September is estimated at $12.90 per million British thermal units (mmBtu), marking an increase from last week's $12.80/mmBtu.
European Influence on Asian Markets
According to Samuel Good, head of LNG pricing at Argus, the rise in Asian prices is primarily linked to increases in Europe. This is despite tepid demand in north-east Asia, where countries like South Korea are experiencing unusually hot weather and facing nuclear power outages. Forecasts predict above-average temperatures in South Korea, Japan, as well as Beijing and Shanghai, which may boost demand for cooling. However, south-east China might see a return to normal temperatures soon, potentially reducing the expected late summer demand spike.
Current Market Dynamics
Klaas Dozeman, a market analyst at Brainchild Commodity Intelligence, notes that while gas demand remains strong enough to attract LNG shipments to Asia, the current high prices could deter some cost-sensitive buyers from entering the spot market. The weakening of the La Nina weather pattern forecast suggests that the anticipated gas demand for the upcoming winter in Asia and North America might be lower than previously expected.
European Gas Price Surge
In Europe, gas prices have increased due to geopolitical tensions in the Middle East and recent military actions in Ukraine's Kursk region. The Dutch TTF hub saw its benchmark front-month contract reach 40.25 euros, the highest since December 8. Despite stable deliveries, traders are wary of potential disruptions in the 40 million cubic meters per day passing through the Sudzha route, prompting adjustments in trading positions.
Regional LNG Price Assessments
S&P Global Commodity Insights and other agencies have provided various price assessments for September deliveries. The North West Europe LNG Marker (NWM) price benchmark was assessed at $12.676/mmBtu on August 8, slightly below the Dutch TTF hub's September gas price. Spark Commodities and Argus reported similar pricing levels.
Freight Rate Trends
LNG freight rates have also seen an upward trend. Atlantic routes increased to $75,250 per day, while Pacific routes climbed for the seventh consecutive week to $86,750 per day, as reported by Spark Commodities analyst Qasim Afghan.
