Asian spot liquefied natural gas (LNG) prices fell this week on comfortable supply position in the short term and as concerns over curtailed supply in Europe have eased with an expected resumption of flows via Nord Stream 1 pipeline.
The average LNG price for October delivery into north-east Asia LNG-AS was estimated at $54.5 per million British thermal units (mmBtu), down $16, or 22.7%, from the previous week, industry sources said.
“Markets have started to retrace, Asian markers and spot pricing are reflective of the change in Europe and inventories seem stable enough on the short term. We should see further declines as NS1 volumes come back online,” said Toby Copson, global head of trading and advisory at Trident LNG.
Nord Stream 1, which runs under the Baltic Sea to supply Germany and others, was running at 20% capacity even before flows were halted for three days this week for maintenance. Deliveries are due to resume on Saturday at 0100 GMT.
However, Russia said on Friday gas deliveries via Nord Stream 1 pipeline remained at risk because just one turbine was operational, deepening European concerns as it struggles to secure enough fuel for winter.
Alex Siow, lead Asia gas analyst at data intelligence firm ICIS, said that with the Nord Stream situation in Europe and since North Asia demand does not seem to be very strong at the moment, there should be a decent gap of at least $10/mmbtu between Asian and European gas prices.
“We expect only Japan and South Korea to be providing decent support. China has not been very active in the spot market, although we do expect it to start buying spot during the winter months from November 2022 to February 2023,” Siow said.
“Japan could be losing steam soon. Based on the high level of storage, some Japanese storages might be encountering tank top soon, preventing it from buying further until demand picks up. But this varies from region to region, as per demand as well,” he added.
In Europe, S&P Global Commodity Insights assessed LNG prices on a delivered ex-ship (DES) basis into north-west Europe (NWE) at $/mmBtu on Sept. 1, a discount of $/mmBtu to October Dutch gas prices, said Ciaran Roe, global director of LNG.
“The differential has been volatile this week, moving between minus $15 and minus $/mmBtu,” he added.
European gas storages were 80.35% full as of Aug. 31, according to Gas Infrastructure Europe data.
“The European gas market is expected to remain tight through this winter come what may, with the weaponisation of Nord Stream just one of the innumerable variables in play,” Wood Mackenzie said in a report.
The report said that a further reduction in Russian flows or a cold winter – or both – will test the energy system’s flexibility and resilience to the absolute limits and push prices higher.
LNG freight spot rates continued to rise with the Atlantic rates jumping 130% form their August levels and hitting $89,250 per day on Sept.2, and Pacific rates estimated at $90,500 per day, according to Spark Commodities.
