Asian spot LNG prices flat amid more certainty over Australia strike action

(Reuters) - Asian spot LNG prices held steady this week as more certainty over potential strike action at LNG facilities in Australia kept buyers on the sidelines from seeking replacement cargoes.

The average LNG price for October delivery into north-east Asia remained at $13.00 per million British thermal units (mmBtu), industry sources estimated.

"A greater degree of certainty has emerged regarding strike action at Australian liquefaction terminals — specifically the Gorgon and Wheatstone facilities," said Samuel Good, head of LNG pricing at commodity pricing agency Argus.

"General expectations from Asian buyers are for only limited impact on cargo availability... Little interest has so far emerged for replacement cargoes, with terminal inventories in northeast Asia largely remaining high as power sector cooling demand begins to wane with the seasonal fall in temperatures across much of the region."

He added that based on weather forecasts, winter heating demand in northeast China is also unlikely to begin until late October, and even further into winter for South Korea and Japan.

Two major LNG production facilities operated by Chevron could face daily work stoppages of up to 10 hours next week after unions on Tuesday threatened labor action in a dispute over pay and conditions.

Workers at Gorgon and Wheatstone downstream facilities plan to stop work for seven hours in two-time blocks on Sept. 7, escalating to 10 hours on Sept. 8 and 11 hours on Sept. 9. A smaller stoppage of three hours is planned at the Wheatstone production platform from Sept. 7.

Rising inventories in East Asian consumers have also kept a lid on prices.

"After concerns of Japan sitting on low stockpiles and potential supply disruptions on the horizon, Japan has finally snuck above the 5-year average for this time of the year," said Dominic Gallagher, head of LNG broking at Tullett Prebon.

"China is also looking well stocked with some forecasts suggesting it could reach 90% of total capacity next month."

In Europe, S&P Global Commodity Insights assessed its daily north-west Europe LNG Marker (NWM) price benchmark for cargoes delivered in October on an ex-ship (DES) basis at $12.082/mmBtu on Aug. 30, a $0.40/mmBtu discount to the October gas price at the Dutch TTF gas hub, said Allen Reed, managing editor, Atlantic LNG.

"After weeks of Atlantic price reactions and market focus on Australia, the market saw muted response following the announcement of industrial action at Chevron facilities," he said.

"European traders have said the expectation of the strikes was already priced in and that high gas inventory levels in Europe and Asia have been the primary reason prices haven't risen on the news."

Argus assessed the north-west Europe DES price at $11.75/mmBtu.

Meanwhile, spot LNG freight rates rose this week, with Atlantic rates gaining $7,500 week-to-date to $121,750/day on Thursday. Pacific rates are up $4,500 to $127,250/day, said Henry Bennett, head of pricing at Spark Commodities.

"Rates are significantly higher than at this time last year when the Atlantic and Pacific (rates) were just at $81,750/day and $71,750/day respectively," he said.

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