Asia spot liquefied natural gas (LNG) prices rose this week as efforts to end the Iran war remained at an impasse, while extended force majeure on Qatari volumes supported prompt markets.
The average LNG price for June delivery into north-east Asia was estimated at $17.80 per million British thermal units (mmBtu), industry sources said, up from $16.70/mmBtu last week.
“Until we see a diplomatic resolution or more meaningful draws going into cooling season, we can expect range bound volatility with upside skew on any supply headline,” said Toby Copson, managing partner at Davenport Energy.
With the Strait of Hormuz is still largely closed, QatarEnergy has issued more force majeure notices for deliveries in June-July, which may boost Asian demand for summer cargoes, trading sources said.
“Geopolitics are still keeping markets on edge. LNG is still influenced by the developments – or maybe the lack of developments – in the Middle East,” said Klaas Dozeman, market analyst at Brainchild Commodity Intelligence.
More and more countries in Asia are reaching the limits of LNG availability, and are bidding more aggressively on the spot markets, he added.
The El Nino weather pattern – a periodic warming of sea surface temperatures in the central and eastern Pacific Ocean -is likely to emerge sooner and stronger than initially projected and could increase cooling demand and reduce hydro availability in the second half of coming summer, Dozeman said.
Martin Senior, head of LNG pricing at Argus, said Indian demand continues to hold strong, but only for prompt cargoes as soaring temperatures has likely pushed some gas into the power stack, while Chinese demand has emerged with a combined 10 summer cargoes, though this could be to backfill some supply rather than signal strong demand.
In Europe, wholesale gas prices at the Dutch TTF hub remained around 46 euros per megawatt hour, 44% higher than pre-war levels.
“Strengthening demand from Asia, supported by expectations of robust summer cooling demand and tighter regional supply, has pulled cargoes eastward, reinforcing competition between the Atlantic and Pacific basins,” said Aly Blakeway, manager of Atlantic LNG at S&P Global Energy.
Meanwhile, hedge funds trading TTF gas futures are sitting on an enormous net long position accumulated since the Hormuz crisis began but are reluctant to open additional large new bullish positions, said Seb Kennedy, independent analyst at Energy Flux.
“This reflects deep uncertainty over the timing and ultimate outcome of back-channel diplomacy that will determine the fate of Middle East LNG exports. The longer Hormuz remains closed, the higher the likelihood that prolonged risk-premium pricing destroys structural Asian LNG demand and undermines the long-term bull case for TTF,” he added.
S&P Global Energy assessed its daily Northwest Europe LNG Marker price benchmark for cargoes delivered in June on an ex-ship (DES) basis at $15.499/mmBtu on April 30, a $0.270/mmBtu discount to the price at the TTF hub.
Argus assessed the price at $15.430/mmBtu, while Spark Commodities assessed the price at $15.465/mmBtu.
Global LNG freight rates fell, with Atlantic rates assessed at $97,500/day, and Pacific rates at $68,750/day, said Spark Commodities analyst Qasim Afghan.
The U.S. front-month arbitrage to Northeast Asia via the Cape of Good Hope and via Panama are both pointing to Asia, he added.
(Reporting by Marwa Rashad; Editing by Nina Chestney)