SINGAPORE: Asian spot liquefied natural gas prices rose to a six-month high this week on the back of cooling demand in India, higher forecast temperatures in north-east Asia and suspended production at an Australian gas facility.

The average LNG price for July delivery into north-east Asia was at US$12.60 per million British thermal units (mmBtu), its highest level since Dec 15, industry sources estimated.

The August delivery price was estimated at US$12.70 per 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 north-east 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 north-east Asian buying had mainly been for trade optimisation, despite the meteorological agencies of Japan and South 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 north-east Asian players will bide their time to evaluate developments in summer requirements.”

On the supply side, Chevron 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 north-west Europe LNG Marker price benchmark for cargoes delivered in July on an ex-ship basis at US$11.151 per mmBtu on June 13, a US$0.07 per mmBtu discount to the July gas price at the Dutch TTF hub.

Argus assessed the July delivery price at US$11.10 per mmBtu, while Spark Commodities assessed it at US$11.122 per 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 four million 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 US$64,250 per day last Friday, and the Pacific rate gaining to US$48,000 per day.

 - Reuters