Asian buyers of liquefied natural gas (LNG) benefitted from a fall in prices this week as stockbuilding eased, China's demand remained weak and players watched for action from EU energy ministers.
The average LNG price for October delivery into north-east Asia was estimated at $46 per million British thermal units (mmBtu), down $8.5, or 18.5%, from the previous week, industry sources said.
"LNG prices retreated as Northeast Asian buyers hit pause on their stockbuilding activities and as Chinese demand remained weak," said Edmund Siau, LNG analyst at consultancy FGE.
China has asked importers to check inventories as a precautionary measure ahead of winter, and they may procure more fuel in coming months if storage is not enough, ANZ said in a report.
The lack of LNG available under long-term contracts may also push Japanese and Korean buyers back to the spot market ahead of winter, which if it turns out to be cold will fuel intense competition for LNG at a time Europe is facing the worst energy crisis in decades.
In Europe, S&P Global Commodity Insights assessed LNG prices on a delivered ex-ship (DES) basis into north-west Europe (NWE) at $47.303/mmBtu on Sept. 8, a discount of $15.75/mmBtu to October Dutch gas prices, said Ciaran Roe, global director of LNG.
"This week has seen prices whipsaw ahead of a key policy meeting among EU energy ministers, as LNG cargo prices moved in a $40-50/mmBtu range," Roe said.
EU energy ministers are meeting on Friday to work out steps to shield citizens and businesses from sky-high energy bills.
"Fears of drastic intervention in the market, such forcing a new price benchmark and price caps for Russian gas, have caused a decline in liquidity at the TTF," Siau said.
A proposal to cap the price Europe pays for Russian gas did not receive broad support during the meeting on Friday, two diplomats with knowledge of the closed-door talks told Reuters.
Russia, which has last week indefinitely shut down gas flows via the major Nord Stream 1 pipeline, warned the West on Friday that plans to try to cap he price of its oil and gas exports in retaliation for the war in Ukraine would ultimately lead to the instability of the United States and Europe.
European gas storage facilities were 82.8 full as of Sept. 7, according to Gas Infrastructure Europe data.
If EU gas storage was filled to 100% before winter, gas supply may be sufficient for November and December, but will face a supply risk for Q1-2023, especially if Nord Stream 1 remains shut, Rystad energy said.
"Europe continues to draw spot LNG from the Atlantic’s export projects, though there are very few remaining open import slots in the region for October, with November’s slot availability already looking thin," said Sam Good, head of LNG pricing at commodity pricing agency Argus.
The new Eemshaven LNG terminal is set to start regasified LNG supply to the Dutch grid from mid-September, but will not be reaching full capacity until late November-early December, based on Dutch gas company Gasunie's expectations, he added.
LNG freight spot rates for the Pacific rose above $100,000 per day and were assessed by Spark Commodities on Friday at $107,000 per day, while the Atlantic rates were assessed at $99,250 per day.
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