By Jacob Gronholt-Pedersen and Oleg Vukmanovic
SINGAPORE, Oct. 10 (Reuters) - Asian spot liquefied natural gas (LNG) prices extended losses for a second week, as low demand for winter cargoes and a sense of inflated values during the recent rally weighed on the market.
Spot LNG prices (LNG-AS) for November delivery edged lower to around $14.20 per million British thermal units (mmBtu), compared with $14.60 per mmBtu last week.
A two-month rally that had taken spot prices to nearly $15 per mmBtu from multi-year lows of $10.50 ended last week as expectations of higher demand for winter cargoes from top buyers Japan and South Korea failed to materialize.
"The momentum got too strong. Outlook is certainly more bearish now," a trader said.
Buyers largely remained on the sidelines, "waiting for sellers to compromise on the price," another trader said.
Steady supply and weak demand during summer months had seen spot prices drop nearly 50 percent from more than $20 per mmBtu earlier this year.
The current decline in prices could spell trouble for some market players who had stored LNG onboard vessels during the recent downturn, hoping to sell them at a profit for winter consumption.
Currently, six to eight cargoes are held in floating storage by various market players, traders said. Spot market hedging options are unavailable in the global LNG market, where prices are not backed by a liquid futures market as seen in natural gas hubs in the United States and Europe.
LNG is mostly supplied to Asian consumers under long-term deals tied to the price of crude oil. The recent slide in Brent prices to around $89 a barrel could prompt some Asian buyers to call on additional long-term supplies where possible.
Such moves would potentially shrink liquidity in spot markets, two traders said. However, it remained unclear how much flexibility was available to buyers under long-term contracts.
The drop in oil prices could also spur Asian utilities to burn more oil at the expense of imported natural gas, although their scope to switch between fuels may also be limited.
"At the moment we haven't heard of such moves, but if spot LNG prices remain high, then of course they will start to consider a switch (to oil)," an Asian trader said.
TENDERS
Australia's North West Shelf (NWS) export project sold one cargo loading in the first ten days of November in a tender to trading house Vitol, four trade sources said.
A fifth source involved in the tender said the cargo was awarded at $14.30 per mmBtu excluding shipping costs to a Japanese trading house, which may on-send it to Vitol.