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Asian spot prices slightly rise on cold weather, despite large inventories

The Asian spot price of liquefied gas (LNG), despite high storage inventories, rose this week due to colder weather forecasts for north-east China.

Average LNG price for delivery to North-east Asia in December Industry sources estimate that the price per million British Thermal Units (mmBtu) was $11.10, up from $11.00/mmBtu in the previous week.

Klaas Dozeman is a market analyst for Brainchild Commodity Intelligence. He said that Asian consumers were showing some interest in buying commodities due to the arrival of the first heating demand and confirmation of La Nina.

La Nina - the cooling of temperatures over the Pacific Ocean in the middle and east - could lead to an increase in winter heating needs, but it is unlikely to last long or be very strong, according the expert.

Dozeman stated that while Chinese trade data showed modest gains in exports and imports, the underlying economic weakening persists due to falling producer prices. The markets are braced ahead of an upcoming deadline of Nov. 10, for U.S. China trade.

Martin Senior, Argus' head of LNG pricing, says that there have been a few spot tenders for spot cargoes, from price-sensitive buyers. However, South Korean demand is particularly weak, as high inventories due to the strong coal burning in recent months has led to import levels of 8-year lows for the first half October.

Gas prices in Europe fell on Friday, as wind farms' strong output curbed the demand for gas and supplies were stable.

Alex Froley is a senior LNG analyst with data intelligence firm ICIS. He said that spot gas prices have remained relatively stable over the past week. The market, in general, has been on a slight downtrend on the long-term.

The weather is a major risk factor for Europe.

According to Florence Schmit of Rabobank, the market appears to be repositioning ahead of winter. With EU storage levels below the average for five years and a greater potential to increase gas demand from Ukraine, some upside risks are reintroduced.

Seb Kennedy, an independent gas analyst, explained that in anticipation of higher winter prices hedge funds reversed their recent sales in TTF Futures by opening up new long positions. Commercial players, on the other hand, opened new short bets against TTF Futures to lock in future profits from physical inventory.

S&P Global Commodity Insights estimated its daily North West Europe LNG Marker price benchmark (NWM) for cargoes to be delivered in December ex-ship on October 16. This represents a $0.53/mmBtu reduction from the December futures prices at the TTF Hub.

Spark Commodities rated the October price as $10.440/mmBtu. Argus rated the price at $10.550/mmBtu.

Qasim Afghanistan, analyst at Spark Commodities, says that the U.S. arbitrage for north-east Asia through Cape of Good Hope currently points to Europe.

The Atlantic region saw the biggest week-on-week rise in LNG rates since June, at $29 500/day. Pacific rates dropped for the eighth consecutive week to $23,500/day. (Reporting and editing by Alexander Smith; Marwa Rashad)

(source: Reuters)