Asian prices edge up as European gas rises again

Spot Asian LNG prices edged up this week to keep up with a renewed rise in European gas prices, but demand remains lukewarm due to high stock levels and average temperatures. 

The average LNG price for February delivery into Northeast Asia edged up to around $34.20-$34.40 per metric MM British thermal units (mmBtu), $0.40-$0.60 higher than the previous week, industry sources said. 

This is still over $14 lower than a spike in the third week of December.

The slightly higher price this week has been partly due to gains in European benchmark gas prices at the Dutch TTF hub in the first week of 2022.

"Much of the increase (this week) can be attributed to the gains in European prices over the past week, with the Japan-Korea-Marker (JKM) moving higher in tandem as it seeks to keep Asia-Pacific and Middle East and North Africa spot supplies within basin," Luke Cottell, EMEA LNG Analytics lead at S&P Global Platts told Reuters.

Although Dutch gas prices cooled in late December, they have been rising again this week on continued low pipeline supplies from Russia and a cold snap.

This continues to incentivize LNG cargoes to come to Europe. Currently, there are nearly 30 LNG tankers scheduled for British, Dutch and Belgian ports for this month so far, with nearly half coming from the U.S. 

Net LNG deliveries to Europe rose to their highest monthly average last December since April 2021 of 356 MMm³d, up 89 MMm³d year-on-year, Cottell said. 

But Asian demand remains lukewarm, as temperatures are expected to continue to be near or above normal levels in the next few weeks and inventories are quite high. 

"LNG and coal inventories are trending high in most countries, and demand remains tepid, with most buyers unlikely to be willing to match the TTF in the event of another surge in the European benchmark," said Wei Xiong, senior analyst at Rystad Energy. 

"As such, confidence is high, with most markets shrugging off Indonesia's announcement of a coal export ban in January. However, some buyers are still assessing the full impact of the ban," Xiong added. 

Indonesia, the world's biggest coal exporter, suspended coal exports on Jan. 1 after the state power utility reported dangerously low inventory levels of coal.

On Friday, Indonesian officials said they aimed to wrap up discussions at the weekend about whether to lift a ban on coal exports. 

Production at Shell's Prelude floating LNG project off the coast of north-west Australia has also been halted until it is shown it is able to operate safely after a fire in December.

This could take at least 1.5 MM tons of production off the market this year 2022 and means offtakers will need to seek alternative supplies, according to Rystad Energy. 

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