Asian spot liquefied natural gas (LNG) prices rose this week to the highest level in five months, as the risk of possible industrial action at some Australian LNG facilities raised concerns over supply.
The average LNG price for October delivery into north-east Asia LNG-AS rose to $14.00 per million British thermal units (mmBtu) from $11.50 the previous week, its highest level since mid-March, industry sources estimated.
Woodside Energy Group said there were no updates on wage disputes at some of Australia’s largest LNG facilities, as the unions involved in talks filed a safety complaint against the company.
Meanwhile, Chevron faces the prospect of work stoppages or even an all-out strike at Australia’s second largest LNG plant at Gorgon and at its Wheatstone operations after voting opened on Friday for a union ballot.
“If Australian strikes affecting 10% of global LNG output did go ahead, and last for a long time such as several weeks or months, there would likely be a much bigger move in spot prices as Japan and other Asian buyers will compete with Europe to replace supply,” said Alex Froley, LNG analyst at data intelligence firm ICIS.
Froley added that the market does not yet seem to expect long-lasting strikes to take place.
Toby Copson, global head of trading at Trident LNG said that actual Asian demand remains weak.
“While there is still an air of trepidation in Asian markets on supply disruption, the main sentiment is weakness – evidenced by Japanese selling into Q4 which will of course, dampen any current spot upside,” Copson said
Samuel Good, head of LNG pricing at commodity pricing agency Argus, said that most of Japan and South Korea remains in a heatwave that is set to continue throughout the rest of summer, but overall power demand is still weak due to greater nuclear and renewable generation
In Europe, gas storage has already reached 90% well ahead of a Nov. 1 deadline. EU Commissioner for Energy Kadri Simson said the bloc’s energy market is in a much more stable position than it was this time last year.
Leo Kabouche, LNG market analyst at consultancy Energy Aspects said European gas market fundamentals remain bearish, with Europe on track to reach an end-October amount of over 100 billion cubic metres in storage.
S&P Global Commodity Insights assessed its daily north-west Europe LNG Marker (NWM) price benchmark for cargoes delivered in September on an ex-ship (DES) basis at $12.799/mmBtu on Aug. 17, a $0.70/mmBtu discount to the October gas price at the Dutch TTF gas hub.
Argus assessed the north-west Europe DES price at $12.85/mmBtu, while Spark Commodities estimated the price at $11.562/mmBtu.
Spark Commodities said the seasonal rally in spot LNG freight rates started a month earlier compared to last year, with the Pacific rates rising above $100,000/day for the first time since early January, reaching $108,500/day on Friday. The Atlantic rates also rose to $101,500/day.