Asian Spot LNG Prices Decline, Weak Demand Amidst Sanctions

Asian spot liquefied natural gas (LNG) prices declined this week due to weak demand and as markets awaited further clarity on U.S. Russian energy sanctions or secondary tariffs.

The average LNG price for September delivery into north-east Asia LNG-AS was at $11.90 per million British thermal units (mmBtu), down from $12.10/mmBtu last week, industry sources estimated.

Spot global gas prices have been relatively rangebound since the start of summer gas season in April, with a brief spike during the Iran strikes in June, said Alex Froley, senior LNG analyst at ICIS, adding that he expected this trend to continue during the remaining months of the summer season.

"The market will be paying close attention to the latest news on tariffs and peace talks between Russia, the U.S. and Ukraine. Increased tariffs on countries like India could slow global trade, cutting energy demand. There's also the possibility of further targeted energy sanctions that could affect oil and gas demand more directly," he said.

President Trump's imposition of an additional 25% tariff on India for its purchases of Russian oil came with a 21-day delay, resulting in a sharp sell-off in energy markets, including gas, said Rabobank energy strategist Florence Schmit.

"While gas and LNG supplies are not at risk under the current sanctions and tariff threats, uncertainty about whether gas might be included in the future will keep markets on edge. Until then, gas markets are experiencing some downtime thanks to ample supply," she added.

In South Korea, spot demand has been weak, with many gas-fired power plants not able to compete on price with coal-fired generation, whereas strong hydro generation following heavy rains and temperatures in line with seasonal averages in southern China has weighed on gas-fired generation, said Martin Senior, head of LNG pricing at Argus.

In Europe, prices remained relatively stable as Friday marks the deadline for Russia to respond to the U.S. ceasefire ultimatum, with secondary oil tariffs on the table.

Russian President Vladimir Putin and U.S. President Donald Trump will meet in the coming days.

"Looking ahead, anticipated Norwegian maintenance later this month, coupled with the need for further injections into Europe's underground storage, could provide upward price support in the second half of August," said Aly Blakeway, manager of Atlantic LNG at S&P Global Commodity Insights.

S&P Global Commodity Insights assessed its daily North West Europe LNG Marker (NWM) price benchmark for cargoes delivered in September on an ex-ship (DES) basis at $10.793/mmBtu on August 7, a $0.475 /mmBtu discount to the September futures price at the TTF hub.

Argus assessed the price at $10.825/mmBtu, while Spark Commodities assessed it at $10.764/mmBtu.

The U.S. arbitrage to north-east Asia via the Cape of Good Hope is now only marginally incentivising U.S. cargos to deliver to Europe, while he arbitrage via Panama is pointing to Asia, said Spark Commodities analyst Qasim Afghan.

Global LNG freight rates remained relatively stable, with the Atlantic rates assessed at $35,750/day and Pacific rates at $33,000/day, Afghan added.

(Reuters)