Asia Spot LNG Prices Fall 6 Percent on Weaker Demand, WGI Says

Liquefied natural gas prices in Northeast Asia “nosedived” as buyers in the region sought fewer cargoes after purchasing sufficient shipments for April delivery, Energy Intelligence Group said.

LNG to be shipped over the next four to eight weeks dropped to $18.20 per million British thermal units in the week ended March 3, down 6 percent from $19.40, the New York-based research company said on the website of its World Gas Intelligence publication. Southwest Europe prices slid to $14 from $14.90.

Asian buyers have largely remained on the sidelines of the spot market due to the availability of cheaper oil-indexed term cargoes through annual contracts that begin next month, according to WGI. Japanese LNG buyers’ annual supply deals typically run from April to March.

“Adding further downward pressure are reports that more European reloads may enter the market and expectations of another cargo from Angola LNG,” according to WGI. Spain is expected to offer at least five reloads in April and Belgium two or three, according to the research company.

Angola LNG last week delayed the close of its tender to March 3 for a cargo delivered by the tanker Malanje, according to two people who received notice of the change.

More cargoes may be available for delivery after the Department of Energy approved ConocoPhillips’ plan to resume exports from its Kenai plant in Alaska to nations with a free trade agreement with the U.S. South Korea is the only country in North Asia that has such an FTA.

Forecast Decline

Prices in North Asia are forecast to decline this week, according to five of eight traders surveyed by Bloomberg News through Feb. 28. Asian importers typically purchase fewer spot shipments in April and May on decreasing heating and power demand during spring in the northern hemisphere.

Some buyers have done deals for May delivery while Asian demand further out remains uncertain, according to WGI. Taiwan’s CPC is seeking an unspecified number of spot cargoes for peak summer power demand with delivery staring from May, a company official said Feb. 26, asking not to be identified citing internal policy.

Prices in Europe dropped after Brazil’s state-owned Petroleo Brasileiro (PETR4) pulled out of the spot market while uncertainty over Russian gas flows through Ukraine and possible demand from Turkey and Italy kept a floor under prices, according to the research company.

“Petrobras had been spending heavily on European reloads and exports from Norway,” according to WGI. “But recent rains have increased hydro output.”

Brazil, the second-biggest producer of hydroelectricity, gets 81 percent of its power from hydro plants mostly owned by the state and has the world’s cheapest wind energy. The country sought to increase the use of fossil fuels last year after the worst drought in 50 years depleted reservoirs.

To contact the reporter on this story: Chou Hui Hong in Singapore at chong43@bloomberg.net

To contact the editor responsible for this story: Pratish Narayanan at pnarayanan9@bloomberg.net

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