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Asian spot LNG prices rise as hot weather increases cooling demand

The Asian spot price of liquefied gas (LNG), which is a form of natural gas, increased this week due to a heatwave that swept Japan and North Korea. Meanwhile, industrial demand in China was subdued.

Average LNG price for August deliveries into North-east Asia Industry sources estimate that the price per million British Thermal Units (mmBtu) is now $12.90, up from $12.70/mmBtu a week ago.

Estimated price for September was $12.70/mmBtu.

Prices have increased this week due to a heatwave across north-east Asia. Seoul experienced its hottest day in 2018 and South Korea and Japan are reducing their LNG stocks to meet the increased cooling demand, said Martin Senior.

Senior stated that at least two Atlantic Basin carriers have diverted from Europe towards Asia since the beginning of the month, and two Qatari carriers also changed their course from Europe toward Asia.

Klaas Dizeman, a market analyst with Brainchild Commodity Intelligence, stated that the demand in South Asia, China and India remains muted, with a cooling trend for this time of year, and a subdued demand from industry, based on production prices and inflation figures published by Brainchild Commodity Intelligence.

Dozeman stated that the import tariffs and the "fluid situation" around them may influence the industrial demand in the coming weeks.

The gas market in Europe is stabilizing.

Gas prices could be finding a bottom for the summer. "Gas prices may be finding a floor for summer."

Froley stated that there is a possibility of a short-term bullishness, if the heatwaves in East Asia continue and if Japan's and Korea’s competition with Europe for fuel to generate summer electricity increases.

He added that the fundamentals of the industry are improving, as the second phase Plaquemines, in the United States will bring an additional 7 million tons of oil per year (mtpa), as well as an additional 14 mtpa of LNG Canada.

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 July 10. This represents a $0.440/mmBtu reduction from the August futures prices at the TTF Hub.

Spark Commodities set the price at $11.639/mmBtu for August, while Argus put it at $11.670/mmBtu.

Spark Commodities analyst Qasim Afghan said that the U.S. Arbitrage to North-East Asia via the Cape of Good Hope is still pointing to Europe while the arbitrage via Panama is pointing to Asia.

Afghan said that on the LNG market, Atlantic rates were the lowest since January, and they were at $31,750/day last Friday. Pacific rates, meanwhile, decreased slightly to $38,750/day. (Reporting and editing by Nina Chestney; Marwa Rashad)

(source: Reuters)