June 21th, 2024 | 8:17

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Global LNG prices hit multi-week highs due to strong demand

Jesus Carames

May 21, 2024 | 6:42 p.m.

Liquefied natural gas (LNG) prices have reached multi-week highs due to a surge in demand in both Europe and Asia. This price increase is due to several factors, including planned maintenance in Norway and increased cooling demand in Asia.

Price increase in Europe for maintenance in Norway

Europe's LNG benchmark price hit its highest level in five weeks on Monday, tracking rising prices at local gas hubs in anticipation of planned maintenance in Norway. The landing price of LNG delivered ex-ship (DES) to northwest Europe in June was assessed at USD 9.91/MMbtu (EUR 31.13/MWh), the highest since April 16. This is due to data provided by Spark Commodities.

LNG followed the TTF (Title Transfer Facility) benchmark contract for the following month, which hit a nearly two-week high on Monday in anticipation of planned disruptions in Norway. Production at the Troll field is expected to be reduced by 46 million cubic meters per day (mcm/d) on Tuesday and Thursday, and the Kollsnes gas processing plant is expected to experience a supply outage of 66 mcm/d in the same period, followed by a further reduction of 38 mcm/d until early June, according to TSO Gassco data.

LSEG analysts noted in a note that they expect European demand to remain "mostly low" due to temperatures above seasonal levels and storage at 67% of capacity. However, additional maintenance in Norway could drive “bullish sentiment.”

Price rise in Asia driven by refrigeration demand

The price of LNG in Asia for next month on the JKM (Japan Korea Marker) index, now for July, stood at USD 11.51/MMbtu on Monday, the highest level since January 9. This widened the premium over TTF to around USD 1.40/MMbtu.

ANZ Bank said in a note that “global gas prices rose due to signs of unexpected strength in demand. High temperatures in Asia boosted cooling demand. However, demand came mainly from Northeast Asia, as China stayed on the sidelines as prices surpassed $10/MMbtu, according to LSEG analysts.

Future outlook and market trends

According to Spark data, it is still more profitable to ship a ship loaded in June in the United States to Asia than to Europe. LNG prices in Asia look set to fall, but will likely maintain a premium over Europe as the region fills its reserves, Montel reported.

In conclusion, The global LNG market is experiencing significant volatility due to both structural and cyclical factors. Maintenance in Norway and strong refrigeration demand in Asia have driven prices to multi-week highs, and these trends are expected to continue in the short term, influencing the transportation and storage decisions of global market players.

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