Asian spot liquefied natural gas (LNG) prices hit their lowest level in two months as high inventories and mild weather weighed on demand.
The average LNG price for January delivery into north-east Asia was $10.66 per million British thermal units, its lowest level since early October and down from $10.90/mmBtu last week, industry sources estimated.
"Asian prices are on a slight downtrend as economic demand still didn't surprise to the upside, with China's manufacturing PMI disappointing at 49.2," said Klaas Dozeman, market analyst at Brainchild Commodity Intelligence.
Weaker coal demand weighed on prices, with weather not showing the coldest side for this time of the year and mainland China may remain warm until the middle of the month while a cold phase just left South Korea, he said.
"The relatively high shipping cots create an extra burden for Asian buyers, needing to overbid European fellows with a larger premium as long as this situation persists," Dozeman added.
Spot prices are approaching the $10 level, where price sensitive buyers consider imports, particularly second tier Chinese importers, said Martin Senior, head of LNG pricing at Argus.
In Europe, gas prices continued to fall on forecasts of warmer and windier weather.
SP Global Energy assessed its daily North West Europe LNG Marker (NWM) price benchmark for cargoes delivered in January on an ex-ship (DES) basis at $8.787/mmBtu on December 4, a $0.45/mmBtu discount to the price at the TTF hub. Argus assessed the price at $8.830/mmBtu, while Spark Commodities assessed it at $8.827/mmBtu.
Investment funds extended their net short position in TTF futures last week, as robust LNG supply into Northwest Europe offset concerns of EU gas storage depletion, said independent gas analyst Seb Kennedy.
The main source of demand in the Atlantic basin continues to be Egypt and Turkey, so buyers in northwest Europe have had to raise their bids to remain competitive, Argus' Senior said.
While prices remained weak in Europe and Asia, US benchmark Henry Hub (HH) gas prices spiked this week to their highest level in three years at over $5/mmBtu for January delivery on a combination of cold weather across the US Northeast and a sharp rise in feedstock demand from LNG plants.
As a result, the spread between Henry Hub and TTF prices has shrunk to the narrowest level since April 2021.
"Some long-term US LNG contract costs are now above US FOB (Free on Board) prices. Stronger spot charter rates have also reduced profits for US Gulf off-takers, but we are nowhere near the point where any US cargo turndowns would be considered," Senior said.
The US front-month arbitrage to north-east Asia via the Cape of Good Hope is marginally pointing towards Europe, while the arbitrage via the Panama Canal is strongly pointing to Asia, said Spark Commodities analyst Qasim Afghan.
Global LNG freight rates in the Atlantic eased for the first time since October to $130,000/day, while Pacific rates were down at $87,500/day, Afghan added.
(Reporting by Marwa Rashad; Editing by Sahal Muhammed)
