GLOBAL LNG-Asia spot LNG slips as high prices curb demand

By Emily Chow

SINGAPORE, April 2 (Reuters) - Asia spot liquefied natural gas slipped this week as high prices curbed demand, while the start of Golden Pass LNG in the U.S. alleviated some supply concerns.

The average LNG price for May delivery into northeast Asia LNG-AS was estimated at $19.00 per million British thermal units (mmBtu), industry sources said, down from $19.30/mmBtu last week.

"Demand mitigation measures and initial Asian demand destruction - given such elevated outright LNG prices simply doesn't work for many industries - alongside headlines around Golden Pass' start-up have somewhat increased the market's perceived ability to absorb a more prolonged disruption to LNG flows," said Kesher Sumeet, senior analyst at Energy Aspects.

"That said, the near-term price reaction does not materially change our view that significant Hormuz-related supply disruption will persist for now."

Asia's premium to Europe has held steady, as the outage at Chevron's Wheatstone plant in Australia impacts Asian buyers more than Europe, said Martin Senior, head of LNG pricing at Argus.

Spot demand in the region, however, is scattered, with requirements in south and southeast Asia focused on the next 45 days, he said.

"Requirements from June onwards are scarce as some buyers hope for the Hormuz situation to improve rather than locking in a spot cargo at higher prices now," said Senior, adding that South Korean and Taiwanese demand has also been strong.

In China, demand remains low given high stocks and fuel switching ability, while Japanese buyers mostly have more supply through long-term contracts than their own demand amid limited Middle East exposure, he added.

In Europe, S&P Global Energy assessed its daily Northwest Europe LNG Marker (NWM) price benchmark for cargoes delivered in May on an ex-ship (DES) basis at $15.742/mmBtu on April 1, a $0.50/mmBtu discount to the price at the TTF hub.

Argus assessed it at $15.84/mmBtu, while Spark Commodities assessed it at $15.749/mmBtu.

"Prices extended their downward trajectory as markets increasingly priced in the prospect of near-term de-escalation in the Middle East, following remarks from Trump suggesting the possibility of a ceasefire with Iran," said Aly Blakeway, manager of Atlantic LNG at S&P Global Energy.

"Despite the start of the summer injection cycle, market participants have largely adopted a wait-and-see approach. Recent volatility in European gas markets, coupled with relatively tight LNG-TTF spreads, has encouraged many traders to defer injections into underground storage further along the curve."

Meanwhile, funds extended their net long position in TTF futures to an all-time high, as markets brace for an accelerated tightening of physical gas balances amid the continued closure of the Strait of Hormuz, said Seb Kennedy, independent analyst at Energy Flux News. Funds also are closing out shorts at record pace, he added.

In LNG freight, Atlantic rates slipped to $92,000/day, while Pacific rates declined to $86,000/day, said Spark Commodities analyst Qasim Afghan.

The U.S. front-month arbitrage to Northeast Asia via the Cape of Good Hope has become marginal, narrowly pointing to Europe, he added.