Asia spot prices rise on hot weather and Australia outage
The price of Asian spot LNG (liquefied natural gases) rose this week to its highest level in six months, mainly due to the cooling down in India and forecasted temperatures for northeast Asia, as well as the suspension of production at a gas facility in Australia.
Average LNG price for July deliveries into North-east Asia
Estimated August delivery prices were $12.70/mmBtu.
The strength of the demand in Asia has supported prices and differentials. "The level of tendering has remained high because of a combination fundamental drivers in different countries including strong economic activity and hot weather. It also reflects the challenges of upstream production as well as restocking of demand," said Lucas Schmitt.
We expect Asian summer LNG to grow year-on-year but at a slower rate than the past few months. The inventories for the key markets in northeast Asia seem to be broadly balanced."
The spot demand for India is still strong, despite a persistent heatwave, but the majority of northeast Asian buyers are doing so to optimize their trade, despite Japan and Korea's meteorological agencies predicting a 50% chance of temperatures above normal in June and July.
"Despite the imminent warm weather forecasts there is still an absence of significant market activities, which could suggest that sufficient supplies are available for the summer ahead. It is expected that Northeast Asian players, at current prices will wait to see how summer demand develops.
Chevron has suspended production of its Wheatstone gas platform in Australia for repairs to the fuel gas system. The company has begun the repair work which should be completed within the next few weeks.
This week, the production suspension boosted Europe gas prices. S&P Global Commodity Insights estimated its daily North West Europe Gas Marker (NWM), a price benchmark for July cargoes on an ex ship (DES) basis, at $11.151/mmBtu in June 2013, a $0.07/mmBtu reduction to the gas price at Dutch TTF hub.
Spark Commodities set the price for July at $11.122/mmBtu while Argus put it at $11.10/mmBtu.
Wood Mackenzie predicts that gas storage will reach its maximum capacity by the end of September and continue to do so until October, while an additional 4,000,000 metric tons per year (tpa), floating storage, has also been accumulated.
Samuel Good, director of LNG pricing for commodity pricing agency Argus, said that "Limitations in European injection demand and weak downstream consumption continue weighing on the region's LNG revenues."
The open inter-basin arbitration for Atlantic loadings continues to pull LNG from Europe to Asia, where the demand remains strong despite Asian spot delivered prices rising well into double digits.
According to Spark Commodities analyst Qasim Afghan the LNG freight rate increased sharply this week. The Atlantic spot rate rose to $64,250/day by Friday and the Pacific rate to $48,000/day.
