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Asian spot LNG price at 4-month-high on supply concerns

This week, Asian spot LNG prices reached their highest level in the past four months due to concerns about disruptions of supply caused by the Israel-Iran war.

Average LNG price for August deliveries into North-east Asia According to industry sources, the price of gas was $14.00 per million British Thermal Units (mmBtu), an increase of 11% over $12.60/mmBtu from last week. This is also the highest since February 21.

Israel launched an attack on Iran last Friday after claiming that Tehran was close to developing nuclear weapons. Iran, which claims its nuclear program is for peaceful purposes only, responded with drone and missile strikes against Israel.

Prices have increased sharply in the past few days. Toby Copson is the chairman of Davenport Energy Partners. He said that they are pricing in possible supply disruptions from the Middle East, and that war premiums will continue to rise as long as the conflict continues.

He added that "while demand is not high in Asia, some may bid on cargoes for any possible tightening supply."

Alex Froley is a senior LNG analyst with data intelligence firm ICIS. He says that Chinese demand in June was around 12% less than the same period last year.

Froley stated that "Geopolitics is likely to continue to drive market volatility, but if the physical supply continues to be stable then it could ease off in time."

So far, there has been no significant disruption in the physical LNG cargoes. QatarEnergy instructed tankers to stay outside the Strait of Hormuz only until the day before loading.

Martin Senior, the head of LNG pricing for Argus, stated that certain buyers could bid higher than European buyers in order to attract Atlantic Basin cargoes because of disruption at Hormuz.

Florence Schmit, energy strategist at Rabobank, believes that a complete closure of the Strait of Hormuz is unlikely to happen in the future.

The fundamental risk to markets is that the energy infrastructure of Qatar will be caught in the crossfire if there's an escalation. She added that damage to the LNG export infrastructure or gas production sites, as well shipping operations will have a bullish impact on long-term gas prices.

Gas prices in Europe at the Dutch TTF Hub eased on Friday, after reaching a new 11-week high Thursday. However, they remain volatile.

S&P Global Commodity Insights estimated its daily North West Europe LNG Marker price benchmark (NWM) for cargoes to be delivered in August ex-ship on June 19. This represents a $0.385/mmBtu reduction from the July futures prices at the TTF Hub. This weekly increase of 15.5% is the largest in nearly four months.

Spark Commodities set the June price at 13.587/mmBtu. Argus estimated the July price at $13.825/mmBtu.

Qasim Afghanistan, an analyst at Spark Commodities, says that the U.S. Arbitrage to North-East Asia via the Cape of Good Hope now points more to Europe while the arbitrage through Panama still points to Asia.

On Friday, the LNG market saw its biggest week-on-week rise since October 2023, at $49750/day. Meanwhile, Pacific rates were unchanged at $32,000/day. (Reporting and editing by Nina Chestney; Marwa Rashad)

(source: Reuters)