Asia spot prices decline on waning Chinese demand

LONDON, July 5 (Reuters) - Asian spot liquefied natural gas (LNG) prices were down this week but remained firm above $12, causing Chinese demand to dip, whereas European prices fell but at a lower pace amid strong inventories and softer demand.

The average LNG price for August delivery into north-east Asia <LNG-AS> was at $12.20 per million British thermal units (mmBtu), industry sources estimated, down from $12.50/mmBtu in the previous week, industry sources estimated.

"The LNG market is reasonably comfortable, however; prices remain firm, which has led to a dip in Chinese demand. And Hurricane Beryl has reminded the market there are still risks ahead," said Alex Froley, senior LNG analyst at data intelligence firm ICIS.

"Strong global gas prices have seen Chinese appetite wane. China imported 5.9 million tons in June 2024, down from 6.3 million tons in June 2023 and from the June record of 6.4 million tons in 2021," Froley said.

Samuel Good, head of LNG pricing at Argus said that many end-users in Asia are stepping back from the market after higher prices have weighed on some demand and limited scope for stronger power cooling demand over the coming several weeks.

"The outlook for southeast China, where the bulk of the country’s gas-fired fleet is situated, remains muted with mostly below-average temperatures on the horizon for this key regional driver of broader northeast Asian summer LNG demand," Good said.

In Europe, gas prices have eased in recent days amid a drop in demand on the back of higher solar and hydro power generation, said Hans Van Cleef, chief energy economist at PZ - Energy Research & Strategy.

"With EU gas inventories at 78% and the Dutch inventories at 69%, the market is not too worried about filling gas inventories in time ... The uptrend for TTF-gas prices is intact for now," he said.

S&P Global Commodity Insights assessed its daily North West Europe LNG Marker (NWM) price benchmark for cargoes delivered in August on an ex-ship (DES) basis at $10.432/mmBtu on July 4, a $0.15/mmBtu discount to the August gas price at the Dutch TTF hub.

Argus assessed the August delivery price at $10.450/mmBtu, while Spark Commodities assessed it at $10.411/mmBtu.

In the United States, the market is closely watching Hurricane Beryl, a Category 2 storm and the first of the 2024 Atlantic season, which has reached Mexico having wreaked havoc in the Caribbean.

"Any hurricanes that reach the LNG production centre of the Gulf of Mexico could impact exports, as when the Cameron LNG plant shut in 2020 in the wake of Hurricane Laura," ICIS' Froley said.

Elsewhere, Egypt's Hoegh Galleon floating storage and regasification unit (FSRU), moored off the Egyptian Red Sea port of Ain Sokhna, has received its first LNG cargo since arriving at the terminal in June, LSEG data showed.

LNG freight rates in the Atlantic saw the smallest week-on-week increase in seven weeks, rising to $89,500/day on Friday. The Pacific rates marginally rose to $52,250/day, said Spark Commodities analyst Qasim Afghan.