Global LNG-Asia at Discount to Europe

Global LNG-Asia at Discount to EuropeGlobal LNG-Asia at Discount to Europe

Asian spot liquefied natural gas prices slipped to trade at a discount to European prices for the first time since 2011, as weak demand weighed, traders said on Friday.

The price of spot LNG for March delivery fell to $6.90 per million British thermal units (mmBtu) on Friday from $7.20 last week, while UK natural gas prices were just above $7.00, according to Reuters.  European gas has not traded at a premium since the Fukushima nuclear crisis caused a spike in Asian demand in 2011. Some traders believe the premium may not hold, however, as European prices would come under pressure at the end of winter.

The European Commission helped negotiate a winter gas deal package after Russia cut supplies to Ukraine in mid-June, but Ukraine will need a new price agreement with Gazprom from April 1, when the current deal expires.

Europe relies on Russia for about a third of its gas, almost half of which is piped via Ukraine. Traders said weak demand and low prices could trigger some suppliers to move maintenance plans forward in a bid to support the market. There is a risk that this could push the supply glut further out though. “If prices are low and there’s an oversupply, shareholders will push plants to advance any maintenance plans, but I don’t think they should push it too much because there’s a lot of new supply coming on later on in the year and next year, so pushing forward maintenance is not necessarily a good idea,” said one trader.