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The Shipping Tribune

Asia spot LNG prices rise as geopolitical tensions fuel supply woes


Asian spot liquefied natural gas (LNG) prices climbed $1 this week despite muted demand, tracking European gas prices, on concerns over tensions in the Middle East and damage to the Balticconnector gas pipeline linking Estonia and Finland.

The average LNG price for November delivery into north-east Asia LNG rose 7.4% to $14.5 per million British thermal units (mmBtu), industry sources estimated.

The price for December delivery was estimated at $17.5/mmBtu, the sources said.

“Markets are having a strong response based on sentiment, while structurally both basins are well supplied somewhat as we move in to an milder winter season,” said Toby Copson, head of energy, APAC, at commodities broker Marex.

“The market is pricing in potential bottlenecks and flows being hampered by the conflict in the Middle East and recent damage to a euro pipeline,” Copson added.

Northeast Asia’s demand remains limited as the region still enjoys inventories throughout, said Auguste Breteau, deputy head of LNG pricing at commodity pricing agency Argus.

Asian importers have withdrawn their demand since the strikes in Australia ended, and demand has not returned even with strikes potentially being revived from next week, he added.

Negotiations over a pay and conditions deal between Chevron CVX.N and unions at its LNG facilities in Australia made progress again on Friday, but fell short of sealing a deal to end months of labour disputes.

In Europe, a potentially deliberate sabotage to undersea pipes in the Baltic have kick-started a very strong week in European gas, with political instability in the Middle East contributing to continued volatility, as gas markets are reminded how precarious Winter could become, said Dominic Gallagher, head of LNG broking at Tullett Prebon.

Supply fears have been stoked as Israel instructed operator Chevron to halt natural gas exports through a major subsea pipeline between Israel and Egypt and as damage to the Balticconnector gas pipeline raised fears over the security of Europe’s key energy infrastructure sites after the Finnish Prime Minister said it could have been done deliberately.

“EU gas prices are capturing a risk premium over supply uncertainty in Australia, Egypt, and the Baltics. This might not be fully reflecting current fundamentals with EU gas storage at 97% full, higher LNG and Norwegian gas flows to Europe week-on-week, and Cove Point back from maintenance,” said Eleni Papadopoulou, lead natural gas analyst at data and analytics firm Kpler.

S&P Global Commodity Insights assessed its daily northwest Europe LNG Marker (NWM) price benchmark for cargoes delivered in November on an ex-ship (DES) basis at $15.718/mmBtu on Oct. 12, a $0.65/mmBtu discount to the November gas price at the Dutch TTF hub, according to Kenneth Foo, S&P’s associate director for APAC LNG.

Argus assessed the price at $15.775/mmBtu while Spark Commodities assessment was at 15.781/mmBtu.

Spot LNG Freight rates fell for the third straight week, with the Atlantic and Pacific rates both dropping to $135,200/day on Friday, according to Henry Bennett, head of pricing at Spark Commodities.
Source: Reuters
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