By Emily Chow
SINGAPORE, Oct 7 (Reuters) – Asian spot liquefied natural gas (LNG) prices fell further this week on healthy inventory levels but a force majeure in Malaysia renewed concerns that buyers might need to seek replacement cargoes amid competition with Europe.
The average LNG price for November delivery into north-east Asia was $34.00 per million British thermal units (mmBtu), down $4.50, or 11.7% pct, from the previous week, industry sources estimated.
"Prices in Asia have continued to trend lower with the help of milder weather and easing demand before winter," said Ryhana Rasidi, gas and LNG analyst at data analytics firm Kpler.
"We see this as a good sign of nations being prepared for the heating season. However, colder-than-average temperatures this winter could still deplete inventory levels fast once heating demand kicks in," she said.
Malaysia LNG, majority owned by Petronas, has declared force majeure on LNG supplies to its customers, including Japanese utilities, due to a leak on the Sabah-Sarawak Gas Pipeline on Sept. 21, at a at a time when Japan and many other countries in Europe are scrambling to ensure gas supply for the peak winter demand season.
"Spot has taken to firming from the Malaysian outage news, which is somewhat sentiment driven when conversely you see Japanese selling into the market and Asian prices in a downtrend," said Toby Copson, global head of trading and advisory at Trident LNG.
In Europe, gas prices have eased ahead of a meeting of European Union leaders to discuss whether and how to put a cap on gas prices before winter sets in.
"Higher shipping rates and bottlenecks in LNG import infrastructure continue to weigh on European LNG prices," said Edmund Siau, LNG analyst at consultancy FGE.
S&P Global Commodity Insights assessed its daily DES Northwest Europe LNG price benchmark, for cargoes delivered in November on ex-ship (DES) basis, at $27.711/mmBtu on Oct. 6, a discount of $22/mmBtu to the November gas price at the Dutch TTF hub, said Ciaran Roe, global director of LNG.
Roe added that there is a strong contango in LNG prices- where a futures price is higher than the spot price – estimated at around $8/mmBtu for cargo deliveries between November and December.
Recent statistics by data intelligence firm ICIS showed that the U.S. LNG supply to Europe exceeded Russian pipeline gas and LNG for the first time ever.
According to ICIS data, U.S. LNG for the EU and Britain stood at 5.3 billion cubic meters (bcm) in September, whereas total Russian supply was at 3.7 bcm, with pipeline gas at 2.2 bcm, the lowest on record.
On spot LNG freight, Atlantic rates rose by 13% on a weekly basis to a new record high of $360,750 per day on Friday, according to Henry Bennett, global head of pricing at Spark Commodities.
"The LNG freight market is tightening seasonally early this year as firms move to secure vessels ahead of the winter. At this time last year, the Atlantic rates were still under $100k," Bennett said. (Reporting by Emily Chow in Singapore; Editing by Marwa Rashad and Nina Chestney)
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