Asian spot prices gain on Europe gas outlook uncertainty

SINGAPORE, Jan 3 (Reuters) - Asian spot liquefied natural gas (LNG) prices rose this week to a one-month peak, as the expiry of a transit deal for Russian gas through Ukraine caused uncertainty in Europe's gas outlook.

The average LNG price for February delivery into Northeast Asia <LNG-AS> was $14.60 per million British thermal units (mmBtu), industry sources estimated.

Ukraine had allowed Russia to keep pumping gas across its territory despite nearly three years of war, but Kyiv refused to renew a five-year deal that expired on New Year's Day.

"While this risk was predictable, the European gas balance remains uncertain in the first quarter. A key concern is the relatively high withdrawals from European gas inventories, which are currently 16% lower year-over-year due to stronger gas demand," said Siamak Adibi, analyst at consultancy FGE.

While this loss of Russian gas will not directly impact Northwest Europe's gas balances, more demand from eastern markets like Slovakia could draw additional volumes from the Western supply pool, added Adibi.

"The suspension of the Russian gas flow via Ukraine could result in a net loss for the European market, necessitating higher LNG imports to balance the market in 2025."

Gains in Northwest European delivered prices have outpaced Asia's price gains, supported by the end of the Russia-Ukraine gas transit deal, downward revisions to minimum temperature forecasts and an unplanned outage at Norway's Hammerfest export terminal, said Martin Senior, head of LNG pricing at commodity pricing agency Argus.

"But there haven't been many Asia to Europe (LNG cargo) diversions, as was seen in mid-November when European delivered prices last rose above Asian delivered prices, as the inter-basin arbitrage has been closed for some weeks, meaning most U.S. Gulf cargoes were already sailing towards Europe instead of Northeast Asia," he said.

"European prices closing above Asian prices has also prompted most west African cargoes to head to Europe instead of Asia — where they had mostly delivered to in 2024."

S&P Global Commodity Insights assessed its daily Northwest Europe LNG Marker (NWM) price benchmark for cargoes delivered in February on an ex-ship (DES) basis at $14.785/mmBtu on Jan. 2, a $0.225/mmBtu discount to the February gas price at the Dutch TTF hub.

Argus assessed the price at $13.795/mmBtu, while Spark Commodities assessed the price at $14.904/mmBtu.

The U.S. arbitrage to Northeast Asia via the Cape of Good Hope for February is firmly closed due to the TTF rally, signalling that U.S. cargoes are incentivised to deliver to Northwest Europe instead, said Spark Commodities analyst Qasim Afghan, adding that the U.S. arbitrage to Northeast Asia via the Panama Canal is also closed.

In LNG freight, Atlantic rates rose to $24,750/day on Friday, while Pacific rates climbed to $21,750/day, Afghan said.

(Reporting by Emily Chow; Editing by Susan Fenton)