March 10, 2023

PZ ERS in the news - Reuters: GLOBAL LNG-Asian spot LNG prices hit 20-month low, incentivizes Chinese return

LONDON, March 10 (Reuters) - Asian spot liquefied natural gas (LNG) this week hit its lowest level since July 2021 on muted demand, but such low levels have incentivized the return of some Chinese players to the market, which if sustained could fuel competition with Europe.

The average LNG price for April delivery into northeast Asia LNG-AS was $13.50 per million British thermal units (mmBtu), down $1, or 6.9%, from the previous week, industry sources estimated.

Prices have fallen nearly 52% year-to-date and around 81% from the August 2022 peak at $70.50/mmBtu.

"Pricing in Asia is now sufficient to bring Chinese activity, with two cargoes booked to a state-owned enterprise, one for its own program in China and another on a FOB (free on board) basis, both at attractive pricing with one below $12/mmBtu," said Toby Copson, global head of trading at Trident LNG.

"While sentiment has been on the bearish side for some time, this should firm the market with the potential for more spot activity from other Chinese players and perhaps cautious front-running from the Europeans with the potential competition for volume now evident," he added.

Samuel Good, head of LNG pricing at commodity pricing agency Argus, said that many traders continue to eye potential Chinese demand for this summer with European underground gas storage looking set to enter the injection period very well stocked.

He added that sustained lower prices have pulled players from southeast Asia and South America back for spot supply.

In Europe, gas prices recouped some early-week losses due to a cold snap with snowy weather across the UK and other parts of the continent, coupled with shutdown at French LNG import terminals since March 7 due to a strike action.

The nationwide, one-week strike is expected to reduce French LNG send-out of gas to the grid by around 0.5 billion cubic meters.

At least four LNG ships heading to France have changed course to other terminals in the UK, Netherlands and Spain, according to Alex Froley, LNG analyst at data intelligence firm ICIS.

"Despite this, onshore gas stocks in Europe are still high for the time of year, so the brief cold snap and diversions won't pose a serious threat to security of supply," Froley said.

In a few weeks time, the start of the filling season will arrive with the continent in a relatively favorable position with high inventories and relatively low demand, according to Hans Van Cleef, chief energy economist at PZ - Energy Research & Strategy.

"This will most likely keep natural gas prices in Europe around current price levels. Upside risks will mainly come from an increase in competition for LNG inflows in Asia, triggering supply issues in Europe," he said.

S&P Global Commodity Insights assessed its daily north-west Europe LNG Marker (NWM) price benchmark for cargoes delivered in March on ex-ship (DES) basis at $12.796/mmBtu on March 9, a discount of $1.3/mmBtu to the April gas price at the Dutch gas TTF hub, according to Allen Reed, managing editor, Atlantic LNG.

Argus' assessment for Northwest Europe DES LNG price was at $12.65/mmBtu on March 9.

LNG spot freight rates remained stable, with Atlantic at $59,750/day on Friday and Pacific rates at $80,250/day, according to Henry Bennett, global head of pricing at Spark Commodities. (Reporting by Marwa Rashad; Editing by Shailesh Kuber)



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