Asian spot LNG prices fell for a sixth consecutive week due to weak trading activity during the Lunar New Year holiday in Asia and lower gas prices in Europe.
The average LNG price for March delivery into northeast Asia was $19.50/MMBtu, down $2.50, or 11.4%, from the previous week, industry sources estimated. Prices have fallen more than 34% year-to-date.
"The market has continued to weaken, mainly driven by a lack of demand from Asia, however the lower pricing has created opportunity for southeast Asia who we've seen issuing tenders," said Toby Copson, global head of trading at Trident LNG.
"Overall, the market is not tight so rates may soften further before we see a reversal from some of the north Asian players coming back to show interest for March onwards. Perhaps even Chinese tier twos encouraged by lower prices," he added, referring to smaller players in the Chinese market.
Japanese LNG purchases will likely remain quite minimal as power utilities still hold a decent stock buffer for the time of year.
However, there is some anticipation of higher spot activity from Chinese buyers following the holidays due to the cold weather and the gradual re-opening of the economy, according to Ryhana Rasidi, gas and LNG analyst at data and analytics firm Kpler.
In Europe, gas prices remained lower on robust LNG imports, high inventories and milder weather.
Tobias Davis, head of LNG Asia at brokerage firm Tullett Prebon, expects LNG cargoes to continue to make their way to Europe in the absence of any fresh demand from the Far East.
"If any incremental demand does emerge and basis markets widen in favor of JKM [Japan/Korea Marker], it won’t take too much of a move to support the economics of sending cargoes east," he said.
Platts' JKM is the LNG benchmark price assessment for spot physical cargoes.
S&P Global Commodity Insights assessed its daily northwest Europe LNG Marker price benchmark for cargoes delivered in March on ex-ship basis at $15.372/MMBtu on Jan. 27, a discount of $2.00/MMBtu to the March gas price at the Dutch gas TTF hub, according to Ciaran Roe, global director of LNG.
"The differential between European and Asian LNG prices, represented by Platts NWE and Platts JKM, is up to $3/MMBtu at the moment, which would attract fully flexible LNG loading in the U.S. to north Asia rather than Europe as...LNG freight has come off," Roe said.
Freeport LNG got regulatory approval to take early steps to restart its fire-idled LNG export plant in Texas, however analysts expect most of the plant's production to remain off line until March or later.
"The return of this facility will bring fresh supply back onto the market which could in turn depress prices," Davis said.
LNG spot freight rates continued to move lower, with Atlantic rates down 60% so far in January and falling further to $58,000/d on Jan. 27. Pacific rates also fell to $79,250/d, according to Henry Bennett, global head of pricing at Spark Commodities.
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