GLOBAL LNG-Asia spot prices fall from 9-week high on muted demand, healthy storage

By Marwa Rashad

LONDON, Feb 6 - Asia spot liquefied natural gas fell this week from a nine-week high last week and a three-week gaining streak as mild weather and healthy storage weighed on demand.
The average LNG price for March delivery into north-east Asia was estimated at $10.70 per million British thermal units (mmBtu), down from $11.60/mmBtu the previous week, industry sources said.
"Prices are expected to trade slightly bearish as the near-term demand outlook remains soft, weighed down by warmer February temperatures in India, weaker-than-expected January inventory draws in China, and LNG stocks in Japan and South Korea sitting above five-year averages," said Arturo Regalado, senior LNG analyst at Kpler.

Martin Senior, head of pricing at Argus, said that Asian prices were still too high to incentivise demand from India and China in particular, adding that a bit of restocking demand has emerged in Japan following a cold spell, though this is likely to be limited to a few cargoes.

In Europe, wholesale gas prices at the Dutch TTF hub edged lower on Friday morning as expectations of milder temperatures curbed demand and as tensions in the Middle East have eased.

There have been concerns about disruptions to shipping at the Strait of Hormuz in the event of a conflict, where roughly a fifth of the world’s LNG has to transit through to reach international markets, Senior added.

The continent's supply picture remains relatively comfortable. On the demand side, warmer conditions are seen limiting near-term demand gains, Kpler's Regalado said.

"Weather remains the key risk, however, with forecasts still flagging the potential for a cold spell mid-February that could provide some upside support," he added.

"The superficiality of the recent winter price rally on TTF is becoming clear in shifting hedge fund positions," said independent gas analyst Seb Kennedy.

“Hedge funds did not add much length during the price spike, and last week they even sold down some TTF long positions as prices returned to earth. This is a clear signal that the spike was an opportunistic weather-driven short squeeze, not a shift back to a bullish pricing regime," he added.

S&P Global Energy assessed its daily Northwest Europe LNG Marker (NWM) price benchmark for cargoes delivered in March on an ex-ship (DES) basis at $10.687/mmBtu on February 5, a $0.97/mmBtu discount to the price at the TTF hub.

Argus assessed it at $10.810/mmBtu, while Spark Commodities assessed the price at $10.744/mmBtu.

In the United States, gas production has rebounded, supporting near-term supply, though east coast supply is yet to recover with freezing temperatures extending well into February, Argus' Senior said.

The U.S. front-month arbitrage to north-east Asia via the Cape of Good Hope have narrowed this week but is still pointing U.S. prompt cargoes to Europe, said Sparks Commodities analyst Qasim Afghan.

Global LNG freight rates remained relatively steady this week, with Atlantic rates assessed at $11,500/day, and Pacific rates at $29,250/day, said Spark Commodities analyst Qasim Afghan.