Page 11 - AsianOil Week 50 2022

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Asian LNG prices rise on

increased demand

PIPELINES & ASIAN spot LNG prices climbed this week on more before the end of this month, while wind
TRANSPORT the back of a cold snap and increased imports and solar power generation is set to remain weak.
by China, narrowing the spread with European The S&P Global Commodity Insights
The spread with prices, Reuters reported. assessed its daily Northwest Europe LNG Marker
European prices has The average LNG price for delivery in Febru- (NWM) price benchmark, for shipments sent in
narrowed. ary to northeast Asia came to $38 per mmBtu, January on an ex-ship (DES) basis, at $37.704
up 2.7% the previous week, the news agency per mmBtu on December 15. This represents a
reported. $4.325 per mmBtu to the January gas price at the
"Volatility has gone up. Spot activity from Dutch TTF gas hub.
China has pushed up front-month pricing and "The recent northern hemisphere cold snap
narrowed the spread to Europe. Cold weather has pushed prices higher, but with storage lev-
forecasts have brought back spot activity from els now more than amply full prices are likely to
North Asia and prices have pushed into the soften over the near-term due to ongoing indus-
mid-upper 30's," said Toby Copson, global head trial and consumer-led demand destruction and
of trading and advisory at Trident LNG, told especially if the warmer weather in EU arrives as
Reuters. "China's return to spot could spark a it is predicted," Jamie Maddock, equity research
push from others hoping not to get caught in the analyst at Quilter Cheviot, commented.
near-term tightening market and bring more In normal years, Asian LNG deliveries are
volatility.” priced at a premium to European prices, but
State-owned Chinese buyer CNOOC has the situation has reversed over the past year as
ordered four to six shipments for delivery a result of Europe’s energy crisis, which was fur-
between February and December next year, ther exacerbated by fallout from Moscow’s inva-
marking one of the biggest spot purchases this sion of Ukraine in February.
year. According to Edmund Siau, LNG analyst at
"Inventory draws start to ramp as we move consultancy FGE, gas demand in Europe’s resi-
into peak winter and end users/utilities need to dential and commercial sectors is higher than in
actively manage this accordingly," Tobias Davis, 2021, despite efforts to cut consumption. Further
head of LNG-Asia at brokerage firm Tullett action to curb demand and increase LNG sup-
Prebon, commented. "Given we currently see plies will be needed through winter and beyond,
a divergence in weather patterns between the he said.
two basins, if the Far East requires incremental LNG freight rates continue to fall, but at
volumes it will need to fight to pull molecules a slower rate than previously due to the typi-
away from the Atlantic, potentially opening up cal quiet year-end period, as vessel availability
the arbitrage (cargo diversion from one market remains higher. The trend has also been sup-
to another) for the first time in many months.” ported by floating storage vessel discharges,
Lower than average temperatures in Europe Henry Bennett, global head of pricing at Spark
are expected to sweep across the continent once Commodities, said. ™

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