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By Henning Gloystein
SINGAPORE (Reuters) - Asian spot prices for liquefied natural gas (LNG) this week rose to their highest for 2016 so far, lifted by OPEC's announcement it would cut crude oil production in cooperation with Russia and by a tightening regional gas market.
Spot prices for Asian LNG rose 30 cents from last week to around $7.40 per million British thermal units (mmBtu), trading sources said.
The main price driver was an agreement reached by the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC oil production giant Russia to cut crude output in order to rein in global oversupply that has dogged markets for more than two years.
The announcement led to a more than 10 percent rise in oil prices to above $53 per barrel.
With 80 percent of Asian LNG supply contracts linked to the price of crude, and oil playing a key role in shipping costs, the spot LNG market was also affected, traders said, pushing prices to their highest since November 2015.
However, because the price link with oil in supply contracts is stronger than oil's influence in spot markets, analysts warned OPEC's output cut could yield a growing price disparity between more expensive term supplies and cheaper spot cargoes.
"The unintended consequence could be the return of acrimonious negotiations as buyers opt for spot cargoes in lieu of its long-term contracts," said Chong Zhi Xin, principal Asia LNG analyst at Wood Mackenzie.
On the demand side, cold weather in the biggest LNG importing countries is also lifting prices as many traders expect utilities in Japan, South Korea and also China to turn to the spot market to buy cargoes to meet strong heating demand.
Weather data in Thomson Reuters Eikon shows that average temperatures in Tokyo and Seoul are expected to be below the seasonal norm in the next 45 days of peak winter demand.
On the supply side, Chevron said on Wednesday it had temporarily halted production from one of its two production units at the huge Gorgon export plant off Western Australia.
The energy major is now seeking three prompt LNG cargoes, in order to meet its supply requirements with clients, said trading sources.
Egypt's state-run EGAS, which issued the import tender in late October, sought a total of 96 cargoes for delivery in 2017 and 2018, with an option to buy 12 additional cargoes in 2017.
(Reporting by Henning Gloystein; Editing by Richard Pullin and Tom Hogue)
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)