Price discounts of Asia LNG to European gas widens to 13-month high on supply concerns

The price discount for Asia LNG cargoes to European gas and LNG have widened to the widest level in 13 months as concerns intensify over potential stoppages of European pipeline gas supply from Russia.

Anxiety over potential sanctions or restrictions on European gas supply have sent prices soaring above LNG cargo prices, while buyers in North Asia shy away from procuring at such levels, sources said.

The price spread between the JKM LNG May derivatives contract and the Dutch TTF gas May contract was assessed at minus $18/MMBtu at the Asian close March 8, compared ot $15/MMBtu a day ago.

This was the largest discount observed between both contracts -- with the price spread first flipping to negative Feb. 24.

"I have no faith in demand from Asia," a Chinese end-user said, adding that the large inter-basin spreads could even incentivize cargo reloads from Asian consumer countries into Europe.

Other sources said that Asian offtakers of Atlantic LNG volumes, portfolio majors and trading houses are now searching for every opportunity to divert volumes into Europe if terminal slots were available.

Further out, JKM derivatives for Q3 2022, Q1 2023 and seasonal 2023 contracts were also trading at between $10/MMBtu and $13/MMBtu March 8 during late Asia hours, data from exchanges and brokers showed.

Spot LNG cargoes delivered into Europe remain cheaper than European pipeline gas with the Platts Northwest Europe Marker April assessed at a discount of $5.75/MMBtu to TTF prices March 8.

The Platts JKM benchmark for April physical deliveries was assessed at $54.281/MMBtu at the Asian close March 8.