Oil and Gas

GLOBAL LNG-Asia prices ease despite restocking demand as Europe's crisis weighs

LONDON, May 13 (Reuters) - Asian spot liquefied natural gas (LNG) prices inched down this week despite some procurement activity to replenish stocks, with more downside seen from muted Chinese activity during COVID-19 lockdowns.

European LNG prices continued to trade at a record discount to Benchmark Dutch TTF gas, as Russian pipeline gas supply issues dominated sentiment. The discount has a knock-on effect on Asian prices.

The average LNG price for June delivery into north-east Asia LNG-AS was estimated at $23.35 per metric million British thermal units (mmBtu), around $0.55, or 2.3% lower than the previous week, industry sources said.

July delivery was estimated at $23.05 per mmBtu, they added.

European gas prices surged, with buyers unsettled by mounting threats to Europe’s supply given regional dependence on Russia.

Pressure to secure alternative supplies rose after Moscow imposed sanctions on European subsidiaries of state-owned Gazprom and Ukraine stopped a major gas transit route.

Any disruption will see Europe scramble to secure additional LNG volumes, with tough conditions to secure long term supplies.

“Shifting flows for Ukraine transit and Russia’s sanctions have created new uncertainties for gas markets. (However) Europe continues to build inventories rapidly due to strong LNG supplies, with storage levels almost back to the 5-year average,” said Edmund Siau, LNG analyst at consultancy FGE.

European LNG prices were assessed at $22.153 per mmBtu for June deliveries to Northwest Europe, equivalent to a $10 per mmBtu discount to the June TTF contract, said Ciaran Roe, global director of LNG at S&P Global Commodity insights.

“It was notable that the market’s strong contango structure through June mirrored the stronger nearby prices for capacity slots at terminals,” Roe said

He added that late-June slots in Northwest Europe were heard traded at $16 million lump sum, or around $4.50 per mmBtu for a full cargo, while early-June slots were heard traded at around 25 million euros ($25.9 million), or $7.5 per mmBtu equivalent for a full cargo.

In Asia, utilities and traders from Japan, Korea and India were in the spot market for summer procurement but lockdowns in China continued to suppress overall Asian demand, Siau said.

Consultancy, Trident LNG, said in a report that some Asian buyers were taking Russian supply and grabbing a number of cargoes at below market pricing.

“Japan, Korea and India are in the market, so I doubt we will see a big decline in prices. I expect a softening into the low $20s to $20 range,” said Toby Copson, global head of trading and advisory at Trident LNG.

He said some smaller Chinese players could be forced back to take cargoes as they make a choice between paying high spot levels in a low demand domestic market or face hefty penalties at terminals for not using booked slots, harming future chances to secure them. (Reporting by Marwa Rashad; Editing by Veronica Brown and Kirsten Donovan)