Uptick in LNG demand in Asia, Europe insufficient to drive prices

(Reuters) - Rising demand for LNG in the top importing regions of Asia and Europe hasn't been enough to spark an increase in spot prices, which continue to languish.

The price of spot LNG for delivery to north Asia <LNG-AS> slipped to $16.50 per million British thermal units (mmBtu) in the week to Nov. 10, down from $17.00 the prior week.

The price has dropped for three consecutive weeks but is still higher than the recent low of $13.50 per mmBtu for the seven days to Oct. 6.

The usual pattern for the spot price in Asia is a rally into the northern winter followed by a decline in the lower demand shoulder season ahead of summer.

However, prices have so far failed to get their usual seasonal bump as demand remains relatively subdued and supply is more than adequate, especially from the United States.

Asia's imports of LNG are forecast to rise to 22.67 million metric tons in November from October's 21.18 million, according to data compiled by commodity analysts Kpler.

The November figure will also be a slight increase from the 21.41 million metric tons from the same month last year.

Much of the increase in Asia's imports of the super-chilled fuel comes from China, the world's second-biggest buyer, with Kpler estimating arrivals of 5.67 million metric tons in November, up from 5.41 million in October, but still below the 6.12 million from November 2022.

Japan, the world's biggest LNG importer, is expected to see arrivals of 5.41 million metric tons in November, unchanged from October and slightly down from 5.65 million in November last year.

India, Asia's fourth-biggest LNG buyer, is expected to import 1.3 million metric tons in November, down from 1.85 million in October.

India is viewed as a price-sensitive buyer and the rally in the spot price from the early October low to a high of $17.90 per mmBtu in the week to Oct. 20 most likely dulled appetite for spot cargoes.

EUROPE GAINS

Europe's imports of LNG are expected to rise in November to 10.12 million metric tons, up from 9.50 million in October and the strongest month since May, according to Kpler.

However, Europe's November arrivals are expected to be below the 11.76 million metric tons from the same month in 2022.

Europe turned to LNG in the wake of the loss of much of its pipeline supply of natural gas from Russia after Moscow's invasion of Ukraine in February 2022.

A combination of demand destruction and high LNG imports up until May this year has resulted in Europe's gas inventories reaching 99.6% full, meaning there is reduced need for additional LNG.

A colder-than-usual winter may drain inventories, but even in this scenario it's unlikely Europe would have to call for additional LNG until January or February.

Europe is buying more LNG from the United States, which is able to offer lower prices than other major exporters such as Qatar because of a surplus of domestic gas output.

Europe's imports of U.S. LNG are expected to reach 5.45 million metric tons in November, up from 3.98 million in October, and the highest since April.

More U.S. LNG is also heading to Asia, with November imports slated at 1.97 million metric tons, up from 1.83 million in October.

While there are some supply concerns such as potential new sanctions on Russia's Arctic LNG-2 project and an electrical fault at Chevron's Gorgon plant in Western Australia, these are not enough to alter the comfortable supply outlook.

This leaves the spot price at the mercy of demand, and while there has been some uptick in both Asia and Europe, it hasn't been enough to drive spot prices higher.

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