Asian LNG prices rise amid Russia's plan to service key pipeline to Europe

Asian liquefied natural gas (LNG) prices extended gains as concern mounted that Russia's planned maintenance on a key pipeline to Europe would further tighten global supplies.

Producers offered LNG spot cargoes for winter above US$60 per million British thermal units (mmBtu) yesterday, traders said.

The Japan-Korea Marker spot benchmark fell 1.3 per cent to US$55.277 per mmBtu last Friday before Russian gas producer Gazprom's announcement, they said, citing data from S&P Global.

Prices gained for five straight weeks and are trading at triple last year's level.

Gazprom said last Friday that it would stop the key Nord Stream pipeline for three days of maintenance from Aug 31, which helped to push Europe's benchmark price to a record.

While the pause is ostensibly for maintenance, Berlin has accused Moscow of halting supplies because of Western sanctions imposed over Russia's invasion of Ukraine.

LNG traders in Asia have expressed concern that the link will not return to service as planned, which would further tighten global markets after Russia progressively cut deliveries to Europe, its biggest customer.

Gazprom said last Friday that shipments through the link under the Baltic Sea to Germany would be restored to current levels, equal to about 20 per cent of capacity, "upon completion of the work and the absence of technical malfunctions".

"We now assume that Russian gas flows to Europe via Nord Stream 1 will fluctuate between zero and 20 per cent capacity in the coming months," said senior analyst Matt Oxenford of the Economist Intelligence Unit.

This, he added, would lead to a recession in Europe this winter.

Utilities in Europe and Asia are in direct competition for LNG shipments from suppliers - including the United States, Qatar and Nigeria - and traders are getting locked in bidding wars to attract cargoes. Japan and South Korea are currently looking to procure more spot LNG for winter, which has helped push prices to the highest level for this time of the year.

Meanwhile, China may struggle to meet peak power demand following hydropower disruptions in the Sichuan region, Bloomberg Intelligence said yesterday, adding that it expected both LNG and coal prices to continue rising in the near term.

BLOOMBERG, AGENCE FRANCE-PRESSE