(Updates June 14 story to add quotes)
By Emily Chow
SINGAPORE, June 15 (Reuters) - Asian spot liquefied
natural gas (LNG) prices rose to a six-month high this week on
the back of cooling demand in India, higher forecast
temperatures in northeast Asia and suspended production at an
Australian gas facility.
The average LNG price for July delivery into north-east Asia
was at $12.60 per million British thermal units
(mmBtu), its highest level since Dec. 15, industry sources
estimated.
The August delivery price was estimated at $12.70/mmBtu.
"The strength of demand in Asia has provided some support to
prices and differentials," said Lucas Schmitt, research director
on short-term LNG at Wood Mackenzie. "The level of tendering
activity has remained high due to a combination of fundamental
drivers across countries, including strong economic activity,
hot weather, challenging upstream production and restocking
demand.
"We expect Asian summer LNG demand to increase year-on-year,
but at a softer rate than in the last few months. Inventories
for key northeast Asian markets seem broadly balanced," Schmitt
added.
Spot demand from India remains strong as a heatwave
persists, said a trader. Monsoon rains, however, have brought
some cooling and hesitancy amid high spot prices, said Rystad
Energy analyst Lu Ming Pang, which "may result in a possibility
of lower spot activity in India."
Pang added that northeast Asian buying had mainly been for
trade optimization, despite the meteorological agencies of Japan
and Korea forecasting a 50% probability of above-normal
temperatures in June and July.
"Despite the impending warm weather forecasts, there is
still a lack of significant market activity, which may suggest
sufficient supplies for the summer season ahead. At current
prices, it is likely that northeast Asian players will bide
their time to evaluate developments in summer requirements."
REPAIR WORK
On the supply side, Chevron ( CVX ) has suspended production
at its Wheatstone gas facility in Australia to repair the
platform's fuel gas system. It has commenced repair work, which
is expected to be completed in the coming weeks.
The production suspension supported Europe gas prices this
week. S&P Global Commodity Insights assessed its daily northwest
Europe LNG Marker (NWM) price benchmark for cargoes delivered in
July on an ex-ship (DES) basis at $11.151/mmBtu on June 13, a
$0.07/mmBtu discount to the July gas price at the Dutch TTF hub.
Argus assessed the July delivery price at $11.10/mmBtu,
while Spark Commodities assessed it at $11.122/mmBtu.
But low European demand for gas has kept storage levels at
record highs this year, with Wood Mackenzie forecasting storage
will be full by end-September and remain so until end-October,
with an additional 4 million metric tonnes per annum (tpa) of
floating storage also accumulated.
"Limitations on European injection demand this summer and
weak downstream consumption continue to weigh on the region's
LNG receipts," said Samuel Good, head of LNG pricing at
commodity pricing agency Argus.
"An open inter-basin arbitrage for Atlantic loadings is
continuing to draw LNG away from Europe and to Asia instead,
where demand has remained strong even as Asian spot delivered
prices have risen well into the double digits."
Meanwhile, LNG freight rates experienced sharp increases
this week, said Spark Commodities analyst Qasim Afghan, with the
Atlantic spot rate rising to $64,250/day on Friday, and the
Pacific rate gaining to $48,000/day.