Asian spot liquefied natural gas prices hit their highest level since end-December 2022 as an escalation of the conflict in the Middle East, high European gas prices and strong demand ahead of winter increased competition for the limited supply.
The average price for October delivery into north-east Asia was estimated at $26.00 per million British thermal units (mmBtu), up from $25.70/mmBtu last week.
Attacks on ships in the Middle East in recent days meant, "very little LNG was able to make its way out of the Persian Gulf," said Klaas Dozeman, market analyst at Brainchild Commodity Intelligence.
"It means that several South-Asian countries have no other choice than to bid for spot cargoes for extremely unpleasant prices," he added.
Prices are expected to remain supported next week, as renewed Strait of Hormuz escalation, rising TTF, and firmer winter procurement interest increase competition for supply, said Ronald Pinto, gas research principal analyst at Kpler.
"Bangladesh buying, stronger Indian demand, and resilient south-east Asian gas burn add further support, partly offset by softer immediate demand from Japan and limited discretionary Chinese buying at elevated prices," he added.
Bangladesh and South Korea were the main Asian buyers of spot cargoes over the past week, with Kogas buying around 14 to 20 cargoes for November to January delivery, and Bangladesh buying 20 cargoes over October to June. This adds to spot tenders from Vietnam, Thailand and India, said Martin Senior, head of LNG pricing at Argus.
In Europe, gas prices hovered slightly above €80, after hitting their highest intraday levels since late December 2022 in the past two days.
"This exemplifies the tight global LNG market with the Strait of Hormuz closed, and how sudden demand changes in Asia can send European prices soaring higher," Argus' Senior said.
The bullish momentum is likely to extend into next week, as ongoing planned maintenance in Algeria, Norway, and the Belgian-UK interconnector will continue to restrict pipeline supply into the EU, while LNG imports are expected to edge lower amid emerging competition from Asia and the Americas, Kpler's Pinto said.
EU storage levels are uncomfortably low ahead of winter, leaving European gas and LNG prices highly sensitive to geopolitical developments and potential supply disruptions, said Aly Blakeway, head of Atlantic LNG at SP Global Energy.
SP Global Energy assessed its daily Northwest Europe LNG price benchmark for cargoes delivered in October on an ex-ship basis at $27.490/mmBtu on Thursday, a $0.47/mmBtu discount to the front-month price at the Dutch TTF gas hub.
Spark Commodities assessed the price at $27.445/mmBtu, while Argus assessed it at $27.420/mmBtu.
In LNG freight, Atlantic rates rose to $20,000/day. Pacific rates steadied at $24,000/day, said Spark Commodities analyst Qasim Afghan.
US Gulf Coast prompt cargoes are currently priced at $26.367/mmBtu. The US front-month arbitrage to north-east Asia via the Cape of Good Hope is still firmly pointing to Europe, while the arbitrage via Panama remains firmly open to Asia, Afghan said.
(Reporting by Marwa Rashad; Editing by Elaine Hardcastle)
