Increase in Asian LNG prices slightly observed after US-China tariff truce agreement
Unleashing Asia's LNG Market Trends
Jumpstarting in London: The past fortnight has seen a nudge upwards in Asian spot liquefied natural gas (LNG) prices, sparking a glimmer of optimism. This shift is in tandem with an improvement in industrial sentiment, as a 90-day tariff truce agreed between the United States and China during diplomatic talks has set off a slight uptick in demand[4].
The value of LNG for July delivery into north-east Asia now settles at an average of $11.75 per million British thermal units (mmBtu), marking a slight increase from last week's $11.50/mmBtu[4]. Toby Copson, chairman at Davenport Energy Partners, weighed in on the surge, stating that "activity has picked up somewhat, and prices have started to trend upwards...with some utilities and traders stepping in to secure June cargoes"[1].
It's crucial to acknowledge, though, that the market does not yet indicate a shortage from a fundamental standpoint[4]. In actuality, lowered costs have tempted certain buyers to meet their contractual commitments[4]. Just recently, China — the world's chief LNG buyer — grappled with its lowest LNG consumption since October 2022, spurring it to peddle US-sourced LNG shipments to Europe because of the tariffs standoff[1].
The 90-day truce declared between the United States and China could breathe life into dormant LNG trade, unfreezing it from the stalemate brought upon by their economic tussle[4]. Potentially, a completed accord between the duo may ignite economic growth in China and bolster gas demand[1].
** guarding the global gas balance **
Outside Asia,gas prices at the Dutch TTF hub maintain a steady dance between 34-35 euros per megawatt hour, balancing between abundant supply and subdued demand[3]. The continent's plentiful reserves and lower consumer appetite have capsized prices, while the persisting narrow spread between the JKM (Japan Korea Marker) and TTF (TTF hub) has reignited rivalry in pricing with Asia[3].
While the tariffs' effect on physical LNG flows may be negligible, due to China's 25% import tax on US LNG remaining sufficient impetus for shipments to seek alternative destinations[4], the positive news has propped up industrial demand expectations[3].
** A glimpse into the future **
In the recesses of Asia, a warmer-than-normal climate in Thailand might boost LNG demand[3]. Conflicting views exist among pundits, with Go Katayama, LNG and gas analyst at data analytics firm Kpler inferring that further Asian price upsurges are conceivable[3]. On the contrary, the outlook in Europe remains static, owing to relaxed EU storage targets and upkeep at key regasification sites such as Zeebrugge and Montoir[3].
As for the LNG freight market, Atlantic rates encountered their steepest weekly dip since January, settling at $32,500/day, while Pacific rates held steady at $22,250/day[2]. Despite the fluctuations, the market remains fluid, subject to changes in global supply and demand dynamics[4].
A commodities trader might find opportunities in the upward trend of Asian LNG prices, taking advantage of the improved industrial sentiment and potential demand increase resulting from the tariff truce between the US and China. Meanwhile, an LNG analytics expert, such as one at a data analytics firm like Kpler, might predict further price upsurges in Asia due to factors like warmer-than-normal climates in certain countries.
