Asian Spot LNG Prices Fall to Ten-Week Low

Asian spot liquefied natural gas (LNG) prices slipped for a second consecutive week to a ten-week low, weighed down by tepid demand and increasing supply from new projects.

The average LNG price for September delivery into north-east Asia LNG-AS was at $11.90 per million British thermal units (mmBtu), industry sources estimated. This is down from $12.30/mmBtu last week and its lowest since May 16.

"Prices fell this week in part because of persistent weak Asian demand, with limited additional spot demand in northeast Asia during a heatwave because much of the additional cooling demand is being met by cheaper coal-fired generation," said Martin Senior, head of LNG pricing at Argus.

"Also, increased renewables generation has pushed some coal-fired generation out of the baseload mix, allowing more available dispatchable capacity to meet peak demand."

Japan and South Korea have seen soaring temperatures during the summer months, incurring power generation demand for cooling needs.

The prospect of supply growth in the coming months also weighed on prices, said Siamak Adibi, FGE's director for gas and LNG supply analytics, adding that supply from Canada will grow in the coming months after the LNG Canada project began production.

"This supply is to meet Asian demand directly," Adibi said. He also noted Venture Global's Plaquemines export facility, which started its second phase production, has reached record output while the Greater Tortue Ahmeyim project offshore Mauritania and Senegal has had smooth operations since loading its first cargo.

In Europe, S&P Global Commodity Insights assessed its daily North West Europe LNG Marker price benchmark for cargoes delivered in September on an ex-ship basis at $10.869/mmBtu on July 24, a $0.44/mmBtu discount to the September futures price at the Dutch TTF hub.

Argus assessed the price at $10.92/mmBtu, while Spark Commodities assessed the August price at $10.723/mmBtu.

"A fall in spot Asian LNG demand over the past few weeks has allowed European buyers to bid at wider discounts to the TTF to secure cargoes," said Argus' Senior.

Meanwhile, Europe's gas storage season is progressing steadily, with storage levels currently around 65%, said Hans Van Cleef, head of energy research at EqoLibrium.

"The injection pace must remain strong to reach the minimum target of 80% before November 1," he said. "Since gas withdrawals from storage were higher this past winter compared to previous years, the storage refill task for this year is more substantial."

The U.S. arbitrage to north-east Asia via the Cape of Good Hope continues to incentivise U.S. cargo deliveries to Europe while the arbitrage via Panama is pointing to Asia, said Spark Commodities analyst Qasim Afghan.

In LNG freight, Atlantic rates held steady at $33,750/day on Friday, while Pacific rates declined to $37,250/day, he added.

(Reuters)