Europe's Gas Uncertainty Help Drive Asian LNG Spot Prices Higher

Friday, January 3, 2025

Asian spot liquefied natural gas (LNG) prices rose this week to a one-month peak, as the expiry of a transit deal for Russian gas through Ukraine caused uncertainty in Europe's gas outlook.

The average LNG price for February delivery into Northeast Asia LNG-AS was $14.60 per million British thermal units (mmBtu), industry sources estimated.

Ukraine had allowed Russia to keep pumping gas across its territory despite nearly three years of war, but Kyiv refused to renew a five-year deal that expired on New Year's Day.

"While this risk was predictable, the European gas balance remains uncertain in the first quarter. A key concern is the relatively high withdrawals from European gas inventories, which are currently 16% lower year-over-year due to stronger gas demand," said Siamak Adibi, analyst at consultancy FGE.

While this loss of Russian gas will not directly impact Northwest Europe's gas balances, more demand from eastern markets like Slovakia could draw additional volumes from the Western supply pool, added Adibi.

"The suspension of the Russian gas flow via Ukraine could result in a net loss for the European market, necessitating higher LNG imports to balance the market in 2025."

Gains in Northwest European delivered prices have outpaced Asia's price gains, supported by the end of the Russia-Ukraine gas transit deal, downward revisions to minimum temperature forecasts and an unplanned outage at Norway's Hammerfest export terminal, said Martin Senior, head of LNG pricing at commodity pricing agency Argus.

"But there haven't been many Asia to Europe (LNG cargo) diversions, as was seen in mid-November when European delivered prices last rose above Asian delivered prices, as the inter-basin arbitrage has been closed for some weeks, meaning most U.S. Gulf cargoes were already sailing towards Europe instead of Northeast Asia," he said.

"European prices closing above Asian prices has also prompted most west African cargoes to head to Europe instead of Asia — where they had mostly delivered to in 2024."

S&P Global Commodity Insights assessed its daily Northwest Europe LNG Marker (NWM) price benchmark for cargoes delivered in February on an ex-ship (DES) basis at $14.785/mmBtu on Jan. 2, a $0.225/mmBtu discount to the February gas price at the Dutch TTF hub.

Argus assessed the price at $13.795/mmBtu, while Spark Commodities assessed the price at $14.904/mmBtu.

The U.S. arbitrage to Northeast Asia via the Cape of Good Hope for February is firmly closed due to the TTF rally, signalling that U.S. cargoes are incentivised to deliver to Northwest Europe instead, said Spark Commodities analyst Qasim Afghan, adding that the U.S. arbitrage to Northeast Asia via the Panama Canal is also closed.

In LNG freight, Atlantic rates rose to $24,750/day on Friday, while Pacific rates climbed to $21,750/day, Afghan said.

(Reuters)

Categories: Energy LNG Vessels Russia Industry News Gas

Related Stories

SBM Offshore’s Jaguar FPSO Enters Drydock in Singapore (Video)

EnQuest Picks Up Offshore Oil and Gas Block in Brunei

Seatrium Makes First Turnkey FPSO Delivery to Petrobras

Woodside and Jera Agree LNG Cargoes Supply for Japan’s Winter Period

CDWE Wraps Up Pin Pile Installation Job for Taiwanese Offshore Wind Farm

Fugro Lands Deepwater Gas Field Job in Southeast Asia

BW Opal FPSO Vessel set for Work off Australia

Scarborough FPU's Topsides and Hull Come Together in Major Engineering Feat (Video)

Sapura Energy Nets $22.6M in Offshore Support Vessel Contracts

MODEC Gets Shell’s Gato do Mato FPSO Ops and Maintenance Job

Current News

Pandion Energy Divests Interests in Three Norwegian Assets to Inpex

China Starts Production at Major Oil Field in Bohai Sea

Dutch Contractor Completes Malaysia’s Largest 'Rig-to-Reef' Decom Project

China Rolls Out 17MW Floating Wind Turbine Prototype

SBM Offshore’s Jaguar FPSO Enters Drydock in Singapore (Video)

EnQuest Picks Up Offshore Oil and Gas Block in Brunei

CNOOC Finds Oil and Gas in South China Sea

Seatrium Makes First Turnkey FPSO Delivery to Petrobras

KBR-SOCAR Joint Venture Secures Work for BP in Azerbaijan

Baker Hughes, Petronas Team Up for Asia-Pacific Energy Resilience

Subscribe for AOG Digital E‑News

AOG Digital E-News is the subsea industry's largest circulation and most authoritative ENews Service, delivered to your Email three times per week

https://accounts.newwavemedia.com