London - European gas hub prices have risen above the price of liquefied natural gas (LNG) on the Asian spot market in a rare occurrence that largely rules out arbitrage of LNG cargoes from the Atlantic to the Pacific basins.
Dutch and British month-ahead gas prices exceeded Asian spot LNG in April for the first time in four years. Asian LNG prices tend to be higher due to the huge demand there with few alternative supplies. The switch in the price values is another twist in a unique year for the fast-expanding commodity as soaring production from new plants, much of it in the U.S. Gulf Coast, coincides with tepid demand from Asia, normally consumer of 75% of global LNG.
Month-ahead Dutch gas was $4.56 per million British thermal units (mmBtu) and the British equivalent was $4.48 per mmBtu by 1315 GMT on Monday, while Asian spot LNG for August was heard at $4.40 per mmBtu [LNG/].
The arbitrage, whereby Atlantic Basin LNG - including from the U.S., Russia and West Africa - headed for Europe instead travels the longer distance to Asia to fetch a higher price, has been largely closed for most of the year. That is because the spread has rarely exceeded the extra cost of shipping - broadly defined as a dollar per mmBtu.