Asian LNG prices plummet to five-month low

WEB DESK: Asian spot liquefied natural gas (LNG) prices experienced a notable dip to a five-month low this week, marking a continuation of losses that commenced in mid-November.

The primary factors contributing to this decline include mild winter weather and elevated inventories, which collectively subdued demand in the region.

Industry sources estimated that the average LNG price for February delivery into north-east Asia witnessed a 4 per cent decrease, settling at $11.20 per million British thermal units (mmBtu), down from $11.70 the previous week.

This drop brings prices to their lowest levels since August 4, highlighting the ongoing challenges faced by the LNG market.

Throughout 2023, Asian LNG prices faced a substantial decline, plummeting nearly two-thirds to an average of $17.68/mmBtu. This trend was primarily attributed to subdued demand in both Asia and Europe throughout the year.

Despite potential risks, such as the threat of attacks on commercial vessels in the Red Sea and Novatek’s force majeure notifications regarding future Arctic LNG 2 supplies due to US sanctions, Asian LNG prices have shown minimal signs of improvement.

Ryhana Rasidi, a gas and LNG analyst at data and analytics firm Kpler, noted, “There have been fairly mild temperatures in parts of northeast Asia for the time of year and ample LNG stocks for now.”

Additionally, the recent earthquake in Japan on January 1, which led to a brief disruption in imports, has contributed to lower LNG imports to northeast Asia this week.

The earthquake, occurring shortly after Japan’s nuclear power regulator lifted an operational ban on Tokyo Electric’s Kashiwazaki-Kariwa nuclear power plant, has raised concerns about the country’s efforts to bring more nuclear capacity online and reduce reliance on imported fossil fuels like LNG.

As of December 24, LNG stocks held by major power utilities in Japan stood at 2.49 million metric tonnes, a slight decrease from the previous week. In Europe, gas inventories remain high, reaching 87 per cent of capacity as of January 1, compared to 83 per cent the previous year, according to Rystad Energy.

With temperatures in Northwest Europe expected to drop significantly in the coming week, there is a potential for increased gas consumption for heating. S&P Global Commodity Insights assessed the daily North West Europe LNG Marker (NWM) price benchmark at $9.87/mmBtu on January 4, providing an $0.80/mmBtu discount to the February gas price at the Dutch TTF hub.

Various assessments from different agencies, including Argus and Spark Commodities, align with this pricing trend.

Analysing spot LNG freight rates, Atlantic rates were estimated at $108,500/day on Friday, while Pacific rates were at $80,250/day, according to Qasim Afghan, an analyst at Spark Commodities.

The LNG market continues to navigate a complex landscape influenced by global events and regional dynamics.

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