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Asian LNG prices slide amid stable European gas flows

LONDON (CNA) – Asian spot liquefied natural gas (LNG) prices declined this week, tracking European gas prices which fell due to stable Russian gas flows and LNG supply.

However, market players remain concerned over the risk of Russian supply disruption amid a tense geopolitical situation following Moscow’s invasion of Ukraine, which remains a bullish factor that could send prices higher.

The average LNG price for April delivery into Northeast Asia was estimated at USD38.00 per metric million British thermal units (mmBtu), down USD2.50, or 6.2 per cent from the previous week, industry sources said.

“It’s all still very politically driven with regards to the Eastern situation and the risk of (Russian gas) cut-off remains. In the meantime, supplies from Russia are healthy, LNG (flow to Europe) is increasing and the outlook on fundamentals is bearish,” a European trader said.

Another factor which would support a price rise would be Europe’s attempts to fill its gas storage during the summer gas season which runs from April through October.

A liquefied natural gas tanker is tugged towards a thermal power station in Futtsu, east of Tokyo, Japan. PHOTO: CNA

“Europe’s attempt to fill out 90 per cent of its gas storage by October is likely to be a challenging endeavour as that would likely slow LNG demand growth in Asia, suggesting elevated prices for months on end,” said senior LNG analyst at Rystad Energy Kaushal Ramesh.

Price agency S&P Global Commodity Insights’ Japan-Korea-Marker (JKM), which is widely used as a spot benchmark in the region, jumped to a record USD84.762/mmBtu Monday as buyers scour global markets for LNG cargoes to replace Russian gas and LNG, but declined later into the week.

Industry and government sources said White House efforts to boost United States (US) LNG exports and cut Europe’s reliance on Russian gas are proceeding slowly, because of concerns about the impact on climate change.

The European commission earlier this week revealed a plan to wean its economies off Russian gas, focussing on replacing Russian gas with alternative supplies of 60 billion cubic metres (bcm), most of which would come from LNG imports.

“The plans strongly lean on the rise of LNG imports, however there won’t be enough LNG available to fill the gap even in the very unlikely scenario that all available LNG were to be shipped towards Europe,” said senior energy economist at ABN Amro Hans van Cleef.

While inventories are running low in Japan and South Korea and would encourage restocking demand, buyers remain reluctant to engage in the spot market and prefer to wait until prices are at more reasonable levels.

Atlantic basin charter rates surged to USD42,000 per day on Friday on the back of increased demand to secure tonnage, according to Henry Bennett at Spark Commodities.