Asian spot LNG prices fall due to weaker demand and ample supply

Asian spot liquefied natural gas (LNG) prices slipped this week on muted demand and ample supply, with the delivery of an LNG cargo from a sanctioned Russian project adding to supply concerns.

The average LNG price for October delivery into Northeast Asia was at $11.15 per million British thermal units (mmBtu), down from $11.40/mmBtu last week, industry sources estimated.

"LNG market sentiment remained calm with arbitrage for US cargoes still Europe-bound. Major Northeast Asian buyers have limited interest in prompt cargoes due to high stocks and a relatively loosened Pacific balance," said Kesher Sumeet, senior LNG analyst at Energy Aspects.

"The risk of Russia's Arctic LNG 2 ramping up LNG exports has significantly increased with the first unloading of a cargo from the facility in China. A full, sustained ramp-up of the first two trains at Arctic LNG 2 is a significant downside risk to JKM prices," Sumeet added, referring to the Japan-Korea-Marker LNG benchmark price assessment for spot physical cargoes in Asia.

The Arctic LNG 2 cargo delivery has weighed on Chinese demand expectations for spot LNG, freeing up spot supply elsewhere, said Martin Senior, head of LNG pricing at Argus.

Additional supply from new projects is also pressuring prices, said Siamak Adibi, director for gas and LNG supply analytics at consultancy FGE.

Besides ramp-ups from Plaquemines in the US, new projects like LNG Canada, Greater Tortue Ahmeyim offshore West Africa and Congo LNG could add around 0.5 million tons per month in July and August, while the return of Norway's Hammerfest LNG after being offline since May represents a recovery of around 400,000 tons per month, he said.

In Europe, SP Global Commodity Insights assessed its daily North West Europe LNG Marker price benchmark for cargoes delivered in October on an ex-ship basis at $10.334/mmBtu on August 28, a $0.56/mmBtu discount to the October futures price at the Dutch TTF hub.

Argus assessed the price at $10.345/mmBtu, while Spark Commodities assessed the September price at $10.264/mmBtu.

"In Europe, LNG demand is still strong year-on-year, but overall gas consumption is weak. Pipeline flows from Azerbaijan and Norway have averaged high for August, allowing inventories to build," said FGE's Adibi, adding that Europe's gas storage is now close to 77 per cent full.

"However, ongoing Norwegian pipeline maintenance may lend some support to TTF prices in September. Looking ahead, if no major or unexpected outages happen, October prices are likely to remain under pressure once again as European storage levels continue to rise."

The US arbitrage to Northeast Asia via the Cape of Good Hope widened for the third consecutive week to continue incentivising deliveries to Europe, said Spark Commodities analyst Max Glen-Doepel. The arbitrage via Panama also widened this week to point to Europe.

In LNG freight, Atlantic rates fell to $34,250/day on Friday, while Pacific rates declined to $33,500/day, he added.

(Reporting by Emily Chow; Editing by Shreya Biswas)