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Asian spot prices fall on weak demand and strong stocks

The price of Asian spot LNG (liquefied natural gases) fell for the first week in five as weak demand in Asia weighed on the prices.

Average LNG price for July deliveries into North-east Asia Industry sources estimate that the price per million British Thermal Units (mmBtu) was $12.30, down from $12.40/mmBtu a week ago.

"LNG demand has been weak in Asia." "There have not been any signs of strong demand from major consumers such as China and India", said Siamak Adibi. Director for gas and LNG Supply Analytics at FGE.

The demand for Southeast Asia is also muted, despite some organic growth on newer markets.

Adibi said that scheduled maintenance at Sabine Pass, in the U.S.A. and Australian Projects in the next few weeks will however constrain supply.

Martin Senior, Argus' head of LNG pricing said that while temperatures in South Korea and Japan are expected to be above average for the season in the next few weeks, buyers in both countries already have large stocks and do not need to buy more spot volume. Indian demand is also weak because of the monsoon.

GAIL is dealing with tank-top problems, which has led to two mid-voyage diversion away from India in this week. Other Indian buyers have been largely excluded from the market, as prices are now above $12.00/mmBtu. This has affected their price-sensitive demand.

Data from the Industry Ministry showed that the LNG stocks held by the major Japanese electric utilities at the end of June were 2.26 million tonnes, compared to 2.07 million tonnes the same period last year and 2.18 millions tons on average over the past five years.

In Europe, S&P Global Commodity Insights estimated its daily North West Europe Gas Marker price benchmark on a ship-to-ship basis for cargoes that were delivered in July at $11.774/mmBtu. This was a $0.465/mmBtu reduction from the gas price for July at the Dutch TTF Hub.

Spark Commodities set the price at $11.750/mmBtu for July, while Argus put it at $11.79/mmBtu.

Hans Van Cleef is the chief energy economist of PZ-Energy. He said that natural gas inventories have begun to grow in Europe.

The price difference between winter and summer is still small, so the level of filling remains similar to previous years.

Since energy companies must deliver gas during the winter season, they are buying it as usual.

According to Spark Commodities analyst Max Glen Doepel, the U.S. Arbitrage to Northeast Asia via the Cape of Good Hope has decreased and still points towards Europe. However, the arbitrage through Panama is slightly pointing toward Asia.

He added that the rates for LNG freight in Atlantic and Pacific have been slightly lowered to $29,000/day, and $20,000/day, respectively. (Reporting and editing by Emily Chow)

(source: Reuters)