Global LNG prices rise on robust demand ahead of peak winter months

November 22, 2021: Asian liquefied natural gas (LNG) prices rose for the second straight week on robust demand from Asian buyers ahead of peak winter months and on supply concerns in Europe after a delay in licensing the new Nord Stream 2 pipeline.

The average LNG price for January delivery into Northeast Asia rose to $36.7 per metric million British thermal units (mmBtu), up $5.2, or 16.5%, from the previous week, industry sources said.

"The delays to Nord Stream 2 have seen a bit of panic creep back into the market especially with the first signs of colder temperatures in Asia and with colder forecasts starting to hit in the U.S. as well," said Ryan McKay, commodity strategist at TDS securities.

On Tuesday, Germany's energy regulator suspended the approval process for Nord Stream 2, a major new pipeline bringing Russian gas into Europe, throwing up a new roadblock to the contentious project and driving up regional prices.

"Europe is entering its first extended cold period of the winter as is Northeast Asia, which could contribute towards a sharp reversal in prices (from the drop in November)," said Jamie Maddock, equity research analyst at Quilter Cheviot.

Asia looks better prepared for winter than Europe, so far, in terms of inventories. However, a repeated cold snap could lead to a buying spree similar to that seen in January that served as the catalyst to fire up prices.

Pacific LNG freight spot rates hit a fresh record high on Friday, with the cost of chartering a vessel to carry a shipment of the super-chilled fuel from Australia to Japan jumping to a record high of $335,000 per day, according to data intelligence firm Spark Commodities.

Atlantic LNG freight rates are still below the all-time high of $322,500 per day from Jan. 21.

In a rare market development, a U.S. LNG cargo on board Elisa Larus tanker diverted from Brazil to Britain's Isle of Grain, according to Refinitive Eikon data.

The diversion of the tanker, which has already arrived in Brazil, indicates that prices in Europe are attractive enough to soak cargoes away from other demand regions like Brazil, traders said.

Market players are also concerned that disruptions to expected deliveries due to outages in Malaysia and Australia could send Asian buyers back to the spot market.

Supply disruptions at Malaysia LNG indicate that up to three additional cargoes could be taken off the market each month from December to March, according to Rystad Energy analysts.

In addition, repairs of a gas leak at Gorgon LNG Train 1 in Australia could take up to three cargoes more out of the market during November-December, posing further upside risk to prices, they added.

Reuters