Global LNG: Asian LNG prices slide as concerns over supply disruptions ease

LONDON: Asian spot liquefied natural gas (LNG) prices fell this week, tracking European gas prices, as concerns over disruptions of Russian gas slightly eased. The average LNG price for May delivery into north-east Asia was estimated at $35.50 per metric million British thermal units (mmBtu), down $2.50, or 6.6%, from the previous week, industry sources said. “European prices are calmer this week as both sides (Russia and Europe) toned down their rhetoric on cutting existing Russian gas exports to Europe,” said Edmund Siau, LNG analyst at consultancy FGE.

Global LNG: Asian LNG prices slide amid stable European gas flows
The global gas market has been tight for a year, driving prices to record levels. Price agency S&P Global Commodity Insights’ Japan-Korea-Marker (JKM), widely used as a spot LNG benchmark in the region, hit a record high of $84.762/mmBtu earlier this month. “A TTF (Dutch gas) premium to Asian LNG prices should ensure Europe continues to pull LNG away from Asia for the time being,” said Robert Songer, LNG analyst at data intelligence firm ICIS.

The European Commission last week published a blueprint to cut EU dependency on Russian gas by two-thirds this year and end all Russian fossil fuel imports well before 2030. Some experts say it will be hard to achieve and possibly trigger a competitive and costly dash for the fuel when energy prices are already inflicting economic pain. The Commission proposes importing around 50 billion cubic meters of LNG, equivalent to around 10% of annual global LNG supply or the volumes of Egypt, Algeria and Nigeria combined.

It also proposes rules requiring EU countries to fill in gas storage 90% by Oct. 1 every year. “The EU’s proposed plans to phase out Russian gas and mandate storage levels look extremely aggressive, and if implemented in their current form would significantly boost TTF prices,” Siau said. Market players are looking for clarity on these plans to hedge against possible price spikes when demand for LNG is high amid limited supply.

“There’s a mismatch between incentives and payment for storage filling. Germany wants 90% of storage to be full by December. Who will buy when the TTF summer price is above the winter price unless there are guarantees they get reimbursed,” an industry source said. In Asia, demand is still muted with north-east Asia consuming an average of 54% of global LNG imports in the first two months of 2022, compared to 67% last year, Refinitiv analysts said.

On Wednesday, a magnitude 7.3 earthquake jolted Japan’s north-east coast, knocking around 6.5 gigawatts of thermal power capacity offline, according to Rystad Energy estimates. It is likely to spur some spot demand from Japanese utilities to replenish stocks.

TN Media News