LNG prices in Asia and Europe rise after Nord Stream 2 delay

LNG withdrawals U.S. natural gas

LNG (Liquified natural gas) prices in Asia rose for the second straight week; as the peak winter months loom and demand strengthened. Supply concerns in Europe after the delay of the Nord Stream 2 pipeline also added pressure to prices, according to Reuters.

Firstly, the average LNG price for January delivery into Northeast Asia rose to $36.7 per mmBtu; up to $5.2, or 16.5%, from the previous week, industry sources said.

About the matter, Ryan McKay, commodity strategist at TDS securities, said. “The delays to Nord Stream 2 have seen a bit of panic creep back into the market, especially with the first signs of colder temperatures in Asia and with colder forecasts starting to hit in the U.S. as well.”

As we reported previously, back on Tuesday, Germany’s government suspended the approval process for Nord Stream 2; the major pipeline that will bring natural gas from Russia to Germany and broader Europe. The suspension threw a new roadblock to an already delayed and much-expected project. Consequently, LNG prices drove up.

Moreover, Jamie Maddock, equity research analyst at Quilter Cheviot, said, quoted by Reuters. “Europe is entering its first extended cold period of the winter as is Northeast Asia, which could contribute towards a sharp reversal in prices (from the drop in November).”

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LNG cargoes diversing from Europe

On the other hand, Asia is indeed better prepared for winter than Europe in terms of inventories. However, a repeated cold snap could lead to a buying spree similar to that seen in January that served as the catalyst to fire up prices.

Furthermore, Reuters reports that Pacific LNG freight spot rates hit a fresh record high this Friday; the cost of chartering a vessel to carry a shipment from Australia to Japan jumped to a record high of $335,000 per day.

On the other hand, Atlantic LNG freight rates are still below the all-time high of $322,500 per day from Jan. 21. Also, a US LNG cargo diverted from Brazil to Britain’s Isle of Grain, according to Refinitive Eikon data. The diversion would mean that prices in Europe are attractive enough to soak cargoes away from other demand regions like Brazil, traders said.

Finally, some market players are also concerned that disruptions to expected deliveries due to outages in Malaysia and Australia could send Asian buyers back to the spot market.

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