GLOBAL LNG-Asian spot prices fall on weak demand and rising supply

By Emily Chow

SINGAPORE, July 4 (Reuters) - Asian spot liquefied natural gas (LNG) eased this week as subdued demand, rising supply and ample inventories weighed on prices, while the ceasefire between Israel and Iran reduced risk premiums.

The average LNG price for August delivery into north-east Asia LNG-AS was $12.70 per million British thermal units (mmBtu), down from $13.10/mmBtu last week, industry sources estimated.

"Rising Pacific supply, high LNG inventories in China and South Korea, and weak industrial demand across China and India continued to pressure the market. The Iran–Israel ceasefire further eased geopolitical risk premiums," said Kpler analyst Go Katayama, adding that output from Australia, Malaysia and Nigeria has increased.

"Looking ahead, the bearish outlook persists, with initial LNG Canada exports adding to supply length. While soft fundamentals dominate, further price declines could stimulate restocking, particularly in Japan."

LNG stockpiles held by major Japanese utilities fell to 2.15 million tons as of June 29, industry ministry data showed, as hotter weather drives cooling demand. This is down from 2.27 million tons the previous week but slightly above the five-year average of 2.1 million tons.

"Despite steady nuclear output, rising temperatures are outpacing non-gas generation capacity, potentially triggering incremental spot buying if the heatwave persists," added Katayama.

In Europe, S&P Global Commodity Insights assessed its daily North West Europe LNG Marker (NWM) price benchmark for cargoes delivered in August on an ex-ship (DES) basis at $11.142/mmBtu on July 3, a $0.435/mmBtu discount to the August gas price at the TTF hub.

Argus assessed the price for August delivery at $11.19/mmBtu, while Spark Commodities assessed it at $11.175/mmBtu.

"A lack of a demand catalyst in the global LNG market failed to spark strong price reactions on the week with the supply picture balancing out as increased liquefaction from the U.S. and Qatar helped to improve supply fundamentals," said Aly Blakeway, manager of Atlantic LNG at S&P Global Commodity Insights.

"With large supply hubs returning from maintenance and Asian demand still relatively on the sidelines, Europe continued to attract the brunt of cargoes as a closed arbitrage to Asia and heatwaves in the Mediterranean lured in waterborne LNG cargoes."

European prices have seen limited upside as demand in competing regions has been weak, while the European Union's less stringent storage targets have shifted supply risks to winter, said Xiaoyi Deng, deputy head of LNG pricing at Argus.

"This is reflected in increasing winter premiums over prompt deliveries in recent weeks," said Deng.

Meanwhile, the U.S. arbitrage to northeast Asia via the Cape of Good Hope is marginally pointing to Europe, while the arbitrage via Panama continues pointing to Asia for a fifth week, said Spark Commodities analyst Qasim Afghan.

In LNG freight, Atlantic rates fell to $42,000/day, while Pacific rates eased to $40,000/day, he added.