Competition for LNG cargoes between Europe and Asia has eased, causing global LNG prices to settle after a period of upward pressure, according to Rystad Energy’s recent market update.
“LNG prices in both Europe and Asia fell this week as competition for spot cargoes between the two regions slowed,” said Mathieu Utting, gas and LNG market analyst at Rystad Energy.
He explained that despite ongoing heat waves across Japan and South Korea, gas demand in Asia remains subdued as nuclear and coal-fired generation meet much of the power load.
Furthermore, new supply from LNG Canada and the resumption of Asian liquefaction plants after maintenance are expected to add downward pressure on spot prices.
In Asia, LNG prices for September delivery dropped 2.7 per cent to US$12 per MMBtu, with the more liquid October contract declining 2.9 per cent to around US$12 per MMBtu by July 22.
Notably, Gorgon LNG resumed full operations after short-term maintenance from July 17-20.
Additional supply from plants like Sakhalin 2 and new liquefaction output from LNG Canada will likely continue to weigh on Asian spot prices, especially for late-summer deliveries.
However, the majority of US-origin LNG shipments are now headed toward Europe due to the closed arbitrage for Asia since early July.
Japan’s LNG inventory at major utilities rose 3 per cent to 1.92 million tonnes, below the five-year average by 11 per cent.
Despite heatwaves and a probability of above-normal temperatures continuing into mid-August, spot prices are pressured as coal-fired and nuclear generation continue to satisfy much of the demand for power.
European LNG prices declined in tandem with Asia’s demand slowdown.
The Northwest Europe LNG price for August delivery fell 1.32 per cent week over week to US$11.3 per MMBtu, while the TTF benchmark dropped 2.42 per cent to US$11.6 per MMBtu.
With the closed arbitrage, LNG cargos largely stayed within the Atlantic Basin, enabling quick deliveries to Europe and making expensive regasification terminals economical again.
Last week, Europe imported 2.31 million tonnes of LNG, up 8.5 per cent week over week, to support storage refill ahead of the winter season.
Norwegian gas flows fell due to treatment plant outages but recovered above 310 million cubic meters per day later in the week.
The EU’s recent sanctions against Russia, including prohibitions on the Nordstream pipeline transfer, further diminish Russia’s gas comeback prospects.
In the US, Henry Hub NYMEX prices declined 8.4 per cent week over week to US$3.2 per MMBtu due to record natural gas production exceeding 108 billion cubic feet per day from July 18-20.
Despite ongoing heatwaves boosting gas for power demand, this was outweighed by high supply, leading to increased injections into storage, currently 6 per cent above the five-year average.
Feedgas to LNG terminals remained stable overall despite minor outages at Elba Island and Freeport LNG, which have since been resolved.
LNG Canada’s Train 1 is expected to reach full capacity by mid-August after a partial outage earlier in its operation.
These developments depict a stabilising global LNG market with Europe intensifying its LNG inflows, reduced demand in Asia due to competing power sources, and robust US gas production maintaining ample supply.
