Asian LNG prices continue to languish despite heatwaves
Quantum Commodity Intelligence – Benchmark LNG prices in Asia have again failed to stem price declines despite record-high seasonal temperatures across large swathes of Asia that have boosted power consumption.
Temperatures during the second-half of April have been registered above 40°C (100°F) across India, Thailand and parts of China, along with many other Asian nations, sending demand for air conditioning soaring.
But North Asian benchmark JKM LNG futures for Jun23 sunk below $12/mmBtu on Monday, extending the downtrend that kicked in after last August's record highs when spot LNG traded above $75/mmBtu.
Market watchers blamed the surplus in LNG markets for the lacklustre price response, citing ample spot availabilities and high inventories, particularly among major LNG importers such as Japan and South Korea, which may have sufficient capacity to re-route cargoes.
According to S&P Global shipping data, floating storage vessels in the first half of April averaged 18-22 vessels, three or four times the usual number for this time of the year, although the heatwave has since pulled in most of these cargoes.
"Supply and demand dynamics in the Far East remain weak, with end users on the offer in summer and a real dearth of demand," said Tobias Davis, Head of LNG at Tullett Prebon.
The S&P Global Platts JKM benchmark was assessed on 24 April at $11.685/mmBtu for physical cargoes delivered into Asia during June, as prices continued to hover around 20-month lows.
Europe
Tullett Prebon also noted that prices in Europe were under pressure as May23 TTF gas futures slipped back below €40/MWh, having briefly spiked on a wave of industrial action in France which lifted spot prices above €50/MWh.
"Prices remain on the back foot, TTF is under pressure as strike action in France ended, bringing healthy LNG flows back into the network as nominations starting reappearing," said Davis.
Weak demand and plentiful supplies also offset near-term supply disruptions, including maintenance last week at Norway's Troll field, along with the Kollsnes processing plant.
"A weak outlook for demand remained a drag on sentiment. Industrial demand for the fuel was down 21% in March, compared with the 2019-2021 average," said ANZ commodity strategist Daniel Hynes, referencing European figures from the Bruegel report.
Hynes also noted Europe weighed on the North Asian LNG markets, after JKM futures ended last week down more than 6%.
