Spot LNG Prices in North-East Asia Edged Lower Due to Stable Supply

The prices of liquefied natural gas (LNG) have faced a considerable dive in the prices owing to its copious supplies across Europe and Asia. The tumefying supplies of the LNG seemed to have eclipsed the fate of its prices.

Priced around USD 28 per million British Thermal Units (mmBtu) last week, the NG prices saw a slump of 6.7 per cent this week, a dipping crunch of USD 2 per mmBtu.

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The average LNG price for December delivery into north-east Asia was USD 8 per million mmBtu this week, down USD 2, or 6.7%, from the previous week, industry sources estimated.

Key Agents that Caused a Turbulence in the LNG Prices

A thunder of intumesced storage of LNG could excoriate the ‘winter hope’. People have started stockpiling the excess LNG quite sooner than the onset of the winter season. In that case, a tumultuous supply creating disruptions in meeting the adequate LNG demand or a spine-chilling cold flick could only help the build of otherwise stuttering prices.

Japan, which is one of the top importers of LNG, has suggested the conservation of electricity in households to extirpate a power crunch in December and March.

Adding to the price swamp created for LNG, hurdles caused by the restrictions imposed in the light of COVID-19 in China have gravely worsened the demand generation. The restrictions aren’t predicted to extenuate any time soon owing to a six-month surge in the daily COVID cases in China. However, to boost the market sentiment, soon-to-be witnessed palliation in the severity of restriction comes as a breeze of hope.

S&P Global Commodity Insights, Europe, evaluated the prices of LNG on the basis of DES- Delivered ex-ship into the region of north-west Europe at USD 24.145/mmBtu, a dip of USD 11.50/mmBtu compared to December Dutch gas prices.

Experts See Hope in Dangling Weather Dynamics

As per Toby Copson, Global Head, Trading and Advisory at Trident LNG, owing to distending availability of cargos, the European pricing has witnessed a stintless freefall. As for Asia, Toby believes the abundance of supplies has pulled the fate of LNG prices down. Due to this, the market prices of LNG have been facing a downpour in the entire region.

He considers a scintilla of hope peeping through the winter season where the demand might see some significant gambol. Hence, the plight in the prices of LNG could see a resurrection in the winter season. However, that is a mere prediction.

Nnenna Amobi, a Senior LNG Analyst at Refinitiv, said that the cumulative LNG imports of Europe witnessed a jump in October to reach 14 billion cubic metres, which is almost half as much more than the imports witnessed last year in October.

She adds how the higher imports elucidate the consistent inflow of LNG to the European region in spite of moderate temperature conditions and plenteous storage of LNG. She also sees the hope in the weather-play and lays her expectations over the changing dynamics of weather inclined towards the chiller scales. A cold snap could, thus, bring about a phase of recuperation for LNG prices, as per her.

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Also, getting Freeport to restart could play a major role in changing the price dynamics for LNG.

Along similar oscillations, as per a gas grid operator in Italy, the storage of gas is close to full with 95% storage occupancy. Similarly, gas storage in Germany was almost full as on November 2, 2022.

The head of Germany’s network regulator prognosticates the depletion of the stored gas soon if cold weather comes to the fore. Hence, he cautions against the hasted consumption of gases. The International Energy Agency, too, has suggested that Europe take action against the potential energy crisis to steer from the shortage of natural gas in 2023.

According to Procurement Resource, although the copious supply has significantly contributed to undermining the demand and the prices, one cold snap is all that is required. Also, an upheaval in the supply chain could push the prices and demand northwards.