Asian prices stable on Japanese demand & Europe uncertainty

3/25/2022

Asian spot LNG prices were stable this week on solid demand form Japanese utilities but amid renewed uncertainty over Russian supply after Moscow's demanded that some countries should pay for gas purchases in roubles.

The market is also trying to comprehend the long-term impact on LNG markets after the U.S. said it will work to supply 15 Bm³ of LNG to the European Union this year to help it wean off Russian energy supplies.

The average LNG price for May delivery into north-east Asia was estimated at $35.00 per metric million British thermal units (MMBtu), down $0.50 from the previous week, industry sources said.

In Asia, Japanese utilities tapped the spot market after an earthquake urged higher demand for LNG to replenish stocks.

President Vladimir Putin said on Wednesday that Russia will seek payment in roubles for gas sold to "unfriendly" countries, raising the risk of a supply squeeze and even higher prices. It remains unclear whether Russia has the power to unilaterally change existing contracts agreed upon in euros.

"Russia’s demand to be paid in roubles for its gas supplies re-injected some uncertainty and volatility into the market in recent days, which could continue into next week. However, at present it doesn’t look like either Europe or Russian want the flows of pipeline gas to physically stop," said Alex Froley, gas and LNG analyst at data intelligence firm ICIS.

Senior U.S. administration officials did not specify what amount or percentage of the extra LNG supply would come from the U.S.

U.S. LNG plants are producing at full capacity and analysts say most of any additional U.S. gas sent to Europe would have to come from exports that would have gone elsewhere.

"You have to break the global gas market model a bit to take this LNG volume form somewhere else and there are not very clear signals now who is going to take responsibility," said Victor Tenev, LNG Business Consultant at ROITI Ltd.

There are also questions over whether Europe will be able to handle such additional volumes with an already stretched regasification capacity.

"Even if they are willing to load these cargoes, we might reach a choke point where several ships cannot unload due to the limited regasification capacity in Europe," Tenev added.

Tamir Druz, managing director at Capra Energy said that while additional U.S. LNG could be achievable given the new capacity the U.S. has added in 2022, finding slots for cargoes is emerging as a key bottleneck in Europe's ability to displace Russian gas with LNG.

"A rapid deployment of additional floating terminals and storage units into Europe can help resolve this within a compressed time frame," he said.

(Reporting by Marwa Rashad; Editing by Nina Chestney)