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Asian spot prices rise on supply and geopolitical concerns

The Asian spot price of liquefied gas (LNG), after two weeks of declining prices, has risen slightly as geopolitical factors such as U.S. sanctions against energy producer Russia and supply concerns have lent support.

Average LNG price for delivery to Northeast Asia in September Industry sources estimate that the price per million British Thermal Units (mmBtu) is now $12.10. This compares to $11.90/mmBtu from last week.

Klaas Dzeman, a market analyst with Brainchild Commodity Intelligence said that geopolitics is back in the spotlight, and the threat of sanctions against offtakers for Russian oil and natural gas could tighten the market, if LNG was purchased elsewhere. However, it's still unclear what will happen.

U.S. president Donald Trump has threatened sanctions against both Russia and its buyers if Moscow does not make progress in ending the conflict in Ukraine by August 8th.

Dozeman said that the U.S.-EU trade agreement remained positive, since the EU committed to buying $250 billion worth of U.S. Energy Supplies per year.

Analysts said that the earthquake this week in eastern Russia, which triggered tsunami alerts, and a slower ramp-up than expected at LNG Canada also added to concerns about supply.

Go Katayama, analyst at Kpler, said: "Any upside is still capped by the weak cooling demand in South and Southeast Asia and the elevated LNG inventory as well as underground gas storages in China."

S&P Global Commodity Insights, based in Europe, assessed the daily North West Europe Gas Marker benchmark price for cargoes to be delivered in September ex-ship at $11.347/mmBtu as of July 31. This represents a $0.45/mmBtu reduction from the September futures prices at the Dutch TTF Hub.

Spark Commodities set the price at $11.374/mmBtu while Argus put it at $11.39/mmBtu.

The bullish sentiment will be suppressed by the strong (gas) pipeline flows and high German wind power generation. "However, LNG supply constraints from Italy's Rovigo Maintenance and increased Egyptian procurement activity could introduce an upward risk," said Kpler Katayama.

Martin Senior, Argus' head of LNG pricing, confirmed that one LNG cargo from the Netherlands was diverted to Egypt. He added that the high temperatures in Egypt may support demand for more cargoes.

Qasim Afghanistan, Spark Commodities analyst, says that the U.S. Arbitrage to Northeast Asia via Cape of Good Hope was widened to continue to encourage U.S. cargo shipments to Europe. The arbitrage via Panama that had been pointing towards Asia for nearly two weeks is now closed, and pointing toward Europe.

He added that in LNG freight, the Atlantic rates increased to $35,500/day last Friday while Pacific rates fell for a 5th consecutive week to $33,500/day.

(source: Reuters)