Higher Asian prices, European gas stocks trigger LNG flow reshuffle

LNG prices rise 20% from last week as European prices continue to fall. (Bloomberg pic)

LONDON: Asian liquefied natural gas (LNG) prices rose this week on some demand for summer cargoes, while European prices continued to drop, with an increased price spread between the two regions triggering interest in sending some Atlantic cargoes to Asia Pacific.

The LNG price for August delivery in northeast Asia is estimated at US$4.80 per million British thermal units (mmBtu), a 20% rise from last week.

Several deals were done this week at a price close to US$5.00 mmBtu for August delivery in Asia, but sources said prices could have decreased slightly by Friday after deals closed.

In contrast, front-month gas price on the Dutch hub in Europe dropped below US$3.20 per mmBtu.

Decreased price netbacks in Europe are making some producers to consider re-exporting cargoes from northwest Europe to more profitable regions, like Asia or the Mediterranean.

Up to four transhipments of Russia’s Yamal LNG cargoes have been agreed for July, a market source said.

In addition, trading houses and utilities are discussing reloads in Europe, another source said. One of these will take place in France’s Fos terminal on July 9, data from operator Fosmax showed.

Japan’s Mitsui is expected to deliver a European cargo to Japan to cover a position that was initially expected to be supplied by cargo from new US plant, Cameron LNG, which was eventually sent to France, another market source said.

Cameron exported its second commissioning cargo this week after earlier delays with loadings.

Price drivers

An uptick in Asian demand has improved Asian LNG prices this week. The demand came from Japanese and Chinese buyers, market sources said.

Japan’s JERA was on the market, as well two or three Chinese companies, sources said but added demand was still weak and prices will likely drop back to US$4.50 mmBtu if there is not enough rise in Asia’s temperatures to drive gas demand for cooling this summer.

On Friday, JERA bought a September cargo from Vitol at US$4.80 per mmBtu at Platts Market on Close window.

In India, there is some short-term LNG demand from power plants, a source active in the Indian markets said.

In addition, India’s Gujarat State Petroleum Corp (GSPC) and Reliance Industries were both looking for an October cargo each, the source added.

On the supply side, Angola LNG is selling a cargo for delivery in August in a tender closing July 2, two market sources said.

Malaysia’s Petronas has offered two cargoes via the LNG trading marketplace Global LNG Exchange (GLX), a market source said.

In Europe, high gas storage levels are weighing on prices.

Aggregated storage level in the Netherlands, Belgium, France and Germany reached around 370 terawatt hours (TWh) this week, data compiled by Refinitiv showed. Current stock level is 74% more than a year ago and 42% more than an average at the same period in the past four years.

Market sources expect that in some European countries’ storage may be filled by August, leading to a further drop in European prices in the rest of the summer months. Usually, storage injections stop at the end of October.

High storage levels may increase the number of reloads in Europe later this year.

“I think we will have too much gas (in stocks) for September, so something will have to move,” a gas trader in Europe said.