Asian spot LNG prices hit 19-month low on tepid demand
LONDON, March 3 (Reuters) - Asian spot liquefied natural gas (LNG) prices continued their downtrend this week, hitting the lowest level since July 2021, due to tepid demand which is expected to last until the end of March.
The average LNG price for April delivery into northeast Asia was $14.50 per million British thermal units (mmBtu), industry sources estimated, down $0.50, or 2.3%, from the previous week, industry sources estimated.
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Prices have fallen more than 48% year-to-date and around 79% from the August 2022 peak at $70.50/mmBtu.
"Recent prices have encouraged South Asian buyers. However it appears sub-$15 still isn't quite enough for the Chinese," said Toby Copson, global head of trading at Trident LNG.
"While market weakness is still evident, it's likely going to take a prolonged period of lows to entice the state-owned enterprises and tier 2 and 3s (players) back. I don't think we've seen the trigger price yet to make the domestic arbitrage profitable," he added.
Leo Kabouche, LNG market analyst at research consultancy Energy Aspects said that an upside to LNG prices is currently limited due to North Asian buyers' absence from spot market, combined with high gas inventories in Europe and the partial restart of U.S. Freeport LNG facility following an eight month-outage caused by a fire.
Kabouche said that heating degree days - a measure used to estimate heating demand - were 15% down on an annual basis across China, Japan and South Korea, with the first two weeks of March are also forecast to be around 16% milder than normal.
In Europe, gas prices have touched levels not seen since August 2021 and LNG cargoes continue to head to the continent with economics still favouring Atlantic deliveries over the Far East, according to said Tobias Davis, head of LNG Asia at brokerage Tullett Prebon.
"A lower demand profile led by warm weather, strong wind power generation and healthy storage continues to help containing prices and forecasts of post winter storage levels of 55% are allaying any market stress," Davis said.
He also said that the April JKM/TTF basin spread- which measures the economics for delivering LNG to Asia versus Europe- has strengthened from $-1.00/mmBtu at end of February to -$0.35/mmBtu in early March, a welcome reversal but still not beneficial numbers for any cargo flows back to Asia.
JKM is the LNG benchmark price assessment for spot physical cargoes in Asia.
S&P Global Commodity Insights assessed its daily north-west Europe LNG Marker (NWM) price benchmark for cargoes delivered in March on ex-ship (DES) basis at $12.814/mmBtu on March 2, a discount of $1.712/mmBtu to the April gas price at the Dutch gas TTF hub, according to Ciaran Roe, global director of LNG.
Spark Commodities assessed the Northwest Europe LNG price at $13.098/mmBtu, a discount of $1.460/mmBtu to the April TTF gas prices.
LNG spot freight rates were steady this week, with Atlantic at $59,250/day on Friday and Pacific rates at $81,000/day, according to Eleni Balomenou, analyst at Spark Commodities. (Reporting by Marwa Rashad; Editing by Nina Chestney)