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Europe driving global LNG price on higher premiums – Rystad


21 Jun 2023 10:01

21 Jun 2023 10:01

(Montel) Europe continues to drive the price of global LNG with its willingness to pay higher premiums compared to Asia, though the latter’s JKM marker is tracking EU prices, Rystad Energy said on Wednesday. 

With activity in the Asian gas market “relatively uneventful”, price volatility was the result of it tracking the more dynamic Dutch TTF hub, the consultancy added in a note.

Benchmark gas prices on the TTF, Europe’s most liquid, had seesawed in a wide EUR 30-50/MWh range over the last two weeks and were last seen around EUR 38/MWh for the front month.

“TTF prices appear to be in a state of flux as it continues to rebalance itself after a spate of supply shocks associated with Norwegian pipeline gas,” Rystad said.

However, volatility should ebb when much of the supply came back from maintenance by mid-July. 

“Barring further supply shocks, or a sudden increase in demand, TTF prices should be less volatile once maintenance on Norwegian pipelines ends,” said the report.

Asian lag

In the meantime, Asian LNG prices on the JKM had been tracking TTF volatility with a day’s lag, pricing in a small price premium to European hub prices for the remainder of the year, it added. 

JKM prices settled last at USD 12.74/MWh (EUR 39.76/MWh) but higher transport costs meant the profitability favoured Europe for a cargo loading in the US for most of the remainder of the year, according to data from intelligence firm Spark Commodities.

While there were pockets of demand in south Asia, buying from China, Japan, and South Korea remained subdued amid high stocks, said Rystad.

“An eye should be kept on the impact of warmer weather ahead, as its severity may play a part in influencing these buyers to return to the market to restock inventories later in the summer,” it said referring to Asia, while adding temperatures in Europe were set to remain higher than normal until early July potentially sparking demand for cooling. 

Competition between Europe and Asia for LNG has been heightened amid the impact of the Ukraine war, with the former turning to the chilled fuel as a key substitute to replace curtailed Russian gas flows. 

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