Asian spot prices rise on China's easing of COVID rules

Asian spot liquefied natural gas (LNG) prices rose this week on positive sentiment after China eased COVID--19 restrictions and some major players' made spot purchases, and European LNG prices remained at a 10-week high.

The average LNG price for January delivery into northeast Asia (LNG-AS) was $37 per million British thermal units (mmBtu), up $2, or 5.7%, from the previous week, industry sources estimated.

"Early positive sentiment and some prompt buys from majors pushed rates up, but we close the week on a decline, despite a clear bullish demand signal with China moving to reopen," said Toby Copson, global head of trading and advisory at Trident LNG.

"Fundamentally, we still see a strong demand case going forward but weakness in oil and European prices, coupled with mild temperatures, has kept pricing in the low-mid 30s. Spot through Jan. looks flat with Feb. looking to be where the activity should come in," he said.

After three years of a "zero-COVID" policy, Chinese authorities have dramatically loosened its strict measures this week, slashing testing, quarantine and lockdown requirements.

"The global LNG market continues to eye the prospect of roll backs on the COVID-19 controls, but a consensus has begun to emerge that spot LNG delivered cargo prices would have to fall substantially to spur a significant rise in Chinese industrial and power sector gas demand," said Samuel Good, head of LNG pricing at commodity pricing agency Argus.

In Europe, LNG prices were at 10-week highs, as temperatures fell below seasonal norms, forcing strong withdrawals from storage. however, record LNG imports still support the market.

S&P Global Commodity Insights (SPGCI) assessed its daily Northwest Europe LNG Marker (NWM) price benchmark, for cargoes delivered in January on ex-ship (DES) basis, at $33.588/mmBtu on Dec. 8, a discount of $8.05/mmBtu to the January gas price at the Dutch gas TTF hub.

"The (Dutch) TTF front-month contract has been pushed to 150 euros/MWh, despite the fact that inventories are well-filled. Uncertainty of how inventories will be at the end of the winter is starting to kick in," said Hans van Cleef senior energy economist at ABN Amro.

Alex Froley, LNG analyst at data intelligence firm ICIS said that this week's temperatures in the UK and western Europe have sent heating demand soaring, with demand forecast to be over 400 million cubic meters (mcm) in Britain, a level only seen on rare occasions in recent years, and up from a 265 mcm/day average in November.

"After a mild October and November, it’s a reminder that conditions could get much tighter if there were a prolonged period of cold weather in the remaining months of winter," he said.

Spot LNG freight rates have halved in the last two weeks, with rates in both basins now under $200,000/day, on limited cargo demand and increased vessel availability moving into the quieter holiday period, according to Henry Bennett, global head of pricing at Spark Commodities.

Spark's Atlantic rate on Friday fell to $182,500/day while the Pacific rate fell to $175,750/day.