Asian LNG prices rise on tightening European market

Asian LNG prices rose this week, despite tepid Asian demand, tracking strong gains in Europe on the latter's tightening gas market ahead of peak winter months amid supply concerns. 

The average LNG price for February delivery into Northeast Asia rose to $43.35 per metric million British thermal units (mmBtu), up $7.55, or 21.1%, from the previous week, industry sources said. 

"East Asian spot LNG is responding to some local bearish factors with terminal tanks are considered to be close-to-full. Europe, meanwhile, continues to rally on the back of developments concerning Nord Stream 2 and the growing tensions in Ukraine," said Tom Marzec-Manser, head of gas analytics at data intelligence firm ICIS. 

"The development related to the TTF and the European gas story will have an impact on Asian prices, with potential changes in flows of Russian gas into Europe being a major driver that could factor in LNG volumes," he added.

European gas prices remain near historical highs on ongoing supply fears after French power giant EDF shut down some nuclear plants following the discovery of faults and after Germany's regulator said the certification process for Russia's new Nord Stream 2 gas pipeline would not be completed in the first half of 2022. 

Asian spot prices have not fully replicated the surge in the TTF, which may encourage further LNG deliveries into Europe and partially balance the prevailing bullish sentiment, according to Rystad energy. 

In a rare market development, a reload cargo from Japan has headed to Europe this week on the JERA vessel Enshu Maru, signaling an opportunity for Europe to draw in spot cargoes, traders said. 

More cargo has been recently heading into the UK rather than the Netherlands as the former has multiple terminals with more capacity and slots.

"The pricing dynamics across Europe are now very attractive and traders will try to get as many cargoes in as possible. This means that capacity is a potential bottleneck driving where cargoes may end up," said Tamir Druz, managing director at Capra Energy Group.

Pacific LNG freight spot rates fell over 40% week-on-week to $158,000 per day, said Henry Bennett at data intelligence firm Spark Commodities, adding the collapse in the JKM-TTF spread reduces the pricing incentive to move cargoes from Atlantic to Pacific basins and reduces ton miles.

The collapse in shipping prices, which hit a record high of $374,500 per day in November, reflects the muted demand in Asia as top consumers China and Japan stay away from the spot market due to ample inventory in their countries. 

Elsewhere in the market, Thailand's PTT is seeking up to two LNG cargoes a month for delivery in January and February in a tender closing December 17. 

Angola's liquefied natural gas (LNG) project has launched a tender on a delivered ex-ship (DES) basis to sell LNG for delivery over January 14-16 to the Atlantic Basin. The tender closes on December 15. 

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