Asian spot LNG climbs to highest level in four months on supply fears
Asian spot liquefied natural gas (LNG) prices rose to their highest level in four months this week on concerns over disruptions to supply due to the Israel-Iran conflict.
The average LNG price for August delivery into north-east Asia was at $14.00 per million British thermal units (mmBtu), up 11 per cent from $12.60/mmBtu last week and the highest level since February 21, industry sources estimated.
Israel began attacking Iran last Friday, saying Tehran was on the verge of developing nuclear weapons. Iran, which says its nuclear programme is only for peaceful purposes, retaliated with missile and drone strikes on Israel.
"Prices have risen sharply over the last few days. We're pricing in potential supply disruptions in the Middle East and war premiums are going up as the conflict carries on," said Toby Copson, chairman at Davenport Energy Partners.
"While demand really isn't there in Asia, it's likely some will bid on cargoes to cover any eventual tightening of supply," he added.
Chinese demand was around 12 per cent lower in June compared to the same month last year, according to Alex Froley, senior LNG analyst at data intelligence firm ICIS.
"Geopolitics will continue to drive volatility but if physical supplies continue to be steady the market could eventually ease," Froley said.
There has not been any significant disruption to physical LNG cargoes so far. QatarEnergy has instructed tankers to remain outside the Strait of Hormuz until only the day before loading.
Martin Senior, head of LNG pricing at Argus, said that some buyers could bid higher relative to European buyers to attract Atlantic basin cargoes due to disruption at Hormuz.
But a full Strait of Hormuz closure still seems unlikely in the long term, said Rabobank energy strategist Florence Schmit.
"The fundamental risk for markets lies in energy infrastructure from Qatar being caught in the crossfire of any escalation. Damages to its gas production sites or even LNG export infrastructure, as well as shipping operations, will have the most bullish and long-term impact on gas prices," she added.
In Europe, gas prices at the Dutch TTF hub eased on Friday after hitting a fresh 11-week high on Thursday but remain volatile.
SP Global Commodity Insights assessed its daily North West Europe LNG Marker (NWM) price benchmark for cargoes delivered in August on an ex-ship (DES) basis at $13.739/mmBtu on June 19, a $0.385/mmBtu discount to the July futures price at the TTF hub. This 15.5 per cent weekly increase is the highest in almost four months.
Argus assessed the price for July delivery at $13.825/mmBtu, while Spark Commodities assessed the June price at $13.587/mmBtu.
The US arbitrage to north-east Asia via the Cape of Good Hope is now more strongly pointing to Europe, while the arbitrage via Panama continues to point to Asia, said Spark Commodities analyst Qasim Afghan.
In the LNG freight market, Atlantic rates recorded its largest week-on-week increase since October 2023 at $49,750/day on Friday, while Pacific rates remained steady at $32,000/day, Afghan added.
(Reporting by Marwa Rashad; Editing by Nina Chestney)
