Asian spot liquefied natural gas (LNG) prices have seen a decline this week after reaching a four-month peak. The drop in prices is attributed to a ceasefire agreement between Israel and Iran, which has alleviated concerns about potential supply disruptions. The average LNG price for August delivery into northeast Asia decreased to $13.10 per million British thermal units (mmBtu), down from $14.00/mmBtu the previous week—the highest level recorded since February 21. According to Charles Costerousse, a senior LNG analyst at Kpler, the outlook for Asian prices is stable to slightly bearish.
A lasting ceasefire between Iran and Israel would reduce geopolitical risks and shift focus back to softer demand in markets such as China and South Korea. Despite the reduced risk in the Strait of Hormuz, prices in Asia remain higher than those in Europe. This is partly due to rising charter rates in the Atlantic basin, which have limited mid-Atlantic diversions, as noted by Martin Senior, head of LNG pricing at Argus. In Europe, gas prices have consistently trended down this week.
With warmer weather on the horizon, increased natural gas demand is anticipated. Hans Van Cleef, head of energy research at EqoLibrium, commented that while gas inventory refills are proceeding effectively, they will remain a crucial focal point in the coming months. Aly Blakeway from S&P Global Commodity Insights emphasized that a stable influx of LNG cargoes and robust pipeline gas supply are effectively meeting power generation demands and aiding the replenishment of underground gas storage in Europe ahead of winter. In the U.S. market, the outlook for Henry Hub prices appears bearish as traders are moving beyond the current heatwave projections towards a milder forecast for early July.
Kpler indicates that arbitrage opportunities are marginally favoring Europe over north-east Asia via the Cape of Good Hope route. Meanwhile, Pacific shipping rates have seen an increase, assessed at $42,500 per day, as Atlantic rates stabilized at $48,750 per day.