Asian JKM gas benchmark slumps to 17-month low, drops below $16/mmBtu
Quantum Commodity Intelligence – Benchmark Asian LNG prices tumbled to the lowest levels in 17 months this week, as both Asia and Europe were seen emerging from the winter largely unscathed, confounding many forecasts of extreme gas pricing over the peak-demand months.
The benchmark S&P Global Platts JKM benchmark was assessed on 8 Feb. at $15.714/mmBtu for physical cargoes delivered into Asia, the lowest since 20 Aug. 2020, according to a Platts official.
Likewise, JKM futures trading on ICE settled Wednesday at $15.55/mmBtu for the Apr23 contract, although the prompter Mar23 contract was close to $18/mmBtu.
Asian LNG prices have fallen in tandem with Europe after both regions registered record highs for gas after Russia's invasion of Ukraine and the increasing unreliability of Russian supplies, particularly to Europe, which had become highly dependent on pipeline gas.
This triggered a pricing war between the two continents, lifting spot values in both regions to record highs by August of last year.
JKM peaked at around $76/mmBtu, while TTF surged to record highs of €350/MWh at the end of last August, an oil equivalent of more than $500/b.
Asia has long been the price-setter for global LNG, but was usurped by Europe last year as buyers there scrambled to replace Russian gas and build inventories ahead of winter.
Europe
The European buying spree quickly filled inventories across the continent and with tanks largely at capacity by the 2H of October, TTF tumbled towards €100/MWh, down around 70% from the August records.
Russian imports made up about 40% of European gas supply before the war in Ukraine, but slumped to less than 10% in the third quarter as buyers turned to the LNG market. Russian supplies were also lost following sabotage of the Nord Stream 1 pipeline.
Additionally, Europe largely averted any major power shortages, helped by one of the mildest winters on record, although analysts have warned Europe could face challenges this year to build inventory levels for next winter.
Asia's largest economies also largely avoided a major energy squeeze, although several developing nations, including Pakistan, struggled to cope with what were still historically high gas prices.
Meanwhile, Morgan Stanley this week cut its price forecast for TTF futures for a second time in just over a month as January demand fell 22% below the norm while LNG imports remained high.
The investment bank expects prices for Europe's natural gas benchmark to fall to €55/MWh in Q2, then slide further to €47/MWh in Q3 before recovering to €55/MWh in the final quarter.
The Mar23 TTF contract settled Thursday just at €53/MWh, also at around 17-month lows.
