Asia spot prices ease on warm weather; focus on Freeport restart

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LONDON — Asian spot liquefied natural gas (LNG) prices eased this week on unusually warmer weather and solid inventories, but market players believe the U.S. Freeport LNG plant’s delayed restart would support prices in the coming weeks.

The average LNG price for January delivery into northeast Asia was $25.5 per million British thermal units (mmBtu), down $0.50, or 1.9%, from the previous week, industry sources estimated.

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This is well below the price range of around $31/mmBtu that prevailed at this time last year.

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“Prices have continued to decline this week, in part due to a considerably warmer period that is unusual for this time of year and that inventories remain well stocked. China also has signaled that they don’t intend to be spot participants for the rest of the year,” said Toby Copson, global head of trading and advisory at Trident LNG.

“Today, there has been an uptick in pricing for Asia, driven by uncertainty on Freeport restart, which will mainly affect Japan. I expect current rates to remain in mid 20’s for near-term and upper 20’s for month-ahead subject to current temps,” he added.

Freeport, which shut on June 8 due to an explosion, has not submitted plans to federal safety regulators to restart its export plant in Texas. Industry sources believe it will not return to service before January 2023.

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Freeport LNG makes up 3.75% of the global market and the extended outage across mid-November through December represents a loss of about 27 cargoes, according to Rystad Energy.

In Europe, S&P Global Commodity Insights assessed its daily DES Northwest Europe LNG price benchmark, for cargoes delivered in November on ex-ship (DES) basis, at $26.244/mmBtu on Nov. 17, a discount of $11/mmBtu to the January gas price at the Dutch TTF hub.

“Weaker industrial demand in Europe means that weather-dependent demand is making up a greater proportion of the region’s aggregate demand. Much of the market is paying keen attention to weather forecasts, which is driving much of the volatility on the European gas hub and delivered LNG prices,” said Samuel Good, head of LNG pricing at commodity pricing agency Argus.

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The European weather outlook was recently revised towards below normal temperatures for the coming weeks.

Market volatility has picked up as the focus in Europe has shifted from building inventories to gas demand, said Hans Van Cleef, senior energy economist at ABN Amro.

“With inventories filled and gas prices bottoming out around 100/MWh euroes on average, investors may see that ahead of the winter, prices can only go higher due to more demand and/or import-related supply risks,” he said.

On LNG freight, spot rates in the Atlantic rate on Friday fell to $475,250/day while the Pacific rate rose to $453,250/day, according to Henry Bennett, global head of pricing at Spark Commodities.

Argus’ Samuel Good said that for the first two quarters of 2023, rates are affected by the weak incentive to ship cargoes from the Atlantic’s export terminals to northeast Asia instead of Europe, where prices for the period have remained either at a premium to Asia or at a discount that is too tight to cover the additional shipping costs. (Reporting by Marwa Rashad; Editing by Devika Syamnath)