Asia spot prices hold at 6-month high as hot weather drives demand
LONDON, June 7 (Reuters) - Asian spot liquefied natural gas (LNG) prices were steady this week, holding near a six-month peak on higher gas-for-power demand due to heat wave in India and East Asia and expected above-normal temperatures for China in mid-June.
The average LNG price for July delivery into north-east Asia was at $12.00 per million British thermal units (mmBtu), unchanged from the previous week and close to its highest levels since mid-December, industry sources estimated.
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"We now see some sort of LNG pull from Europe as Asian demand remains robust. Fortunately, storage levels in Europe are still high, so there is no immediate need for large imports," said Siamak Adibi, principal consultant at energy consultancy FGE.
Asian markets were also supported initially by European gas supply concerns, but have largely retained their gains as additional interest has emerged from buyers, especially in Japan and South Korea, said Samuel Good, head of LNG pricing at commodity pricing agency Argus.
The Japan Meteorological Agency foresees a 50.6% probability for an above-normal temperature occurrence between June and August, with the potential to drive up gas-for-power demand, while South Korea has a 50% probability for above-average temperatures between June 3 and June 23, Rystad Energy data showed.
More Atlantic LNG was shipped to Asia, and the open inter-basin arbitrage suggests a firm incentive for this to continue, Good said.
In Europe, gas prices rose by 11.4% on Monday, hitting a six-month high, on concerns over Norwegian supply due to unplanned outage at Gassco-operated Nyhamna processing plant.
S&P Global Commodity Insights assessed its daily North West Europe LNG Marker (NWM) price benchmark for cargoes delivered in July on an ex-ship (DES) basis at $10.547/mmBtu on June 6, a $0.75/mmBtu discount to the July gas price at the Dutch TTF hub.
Argus assessed the July delivery price at $10.450/mmBtu, while Spark Commodities assessed it at $10.575/mmBtu.
On June 3, the NWM price was assessed at $11.397/mmBtu, the highest since Dec. 8, S&P data showed.
This coincided with a rise in U.S. prices as high temperatures in the Southwest boost gas-for-power demand despite a temporary dip in gas production.
"Surging gas prices across markets last Monday tell a story of vulnerability worldwide. ... and highlight how sensitive interconnected gas balances can be," said Rystad analyst Christoph Halser.
FGE's Adibi said while there is strong demand in Asia and the Middle East, LNG supply is lagging.
"When we look at production performances, the results seem concerning. The ongoing issues in Freeport, the supply shortage in Egypt, (Russian) Arctic 2 shipping issues and inability to load cargoes, and unplanned outages elsewhere are really troubling," he said.
LNG freight rates in the Atlantic saw the third consecutive week of significant increases, rising to $57,000/day on Friday. The Pacific rates remained steady at $45,250/day, said Spark Commodities analyst Qasim Afghan.
(Reporting by Marwa Rashad; Editing by Sriraj Kalluvila)