Asian winter LNG prices at record $60/mmBtu on global supply crunch
Quantum Commodity Intelligence - Asian LNG futures soared to record highs this week with buyers increasingly forced to compete with runaway European prices, where a squeeze on Russian supplies has sent costs spiralling to record highs, bar a brief spike in March.
North Asian benchmark JKM futures for Oct22 rallied to almost $57/mmBtu on Tuesday, up around $12/mmBtu in the past week,
The key winter contracts for Dec22, Jan23, and Feb23 were all settled at above $60/mmBtu for the first time as key North Asian buyers, including China, Japan, and South Korea, prepare for winter shortages.
"Japan's top LNG importer purchased several spot shipments for delivery this winter via tender last week. This comes amid ongoing supply issues. Shell's Prelude LNG facility in Australia is expected to remain offline into next month due to an ongoing strike," said ANZ commodity strategist Daniel Hynes in an investor note published Wednesday.
Developing nations across Asia are already feeling the pain in recent weeks after prices crossed $60/mmBtu, often having to abandon tenders or cancel spot purchases amid skyrocketing prices.
European natural gas prices surged to fresh six-month highs Tuesday and hit all-time closing highs, boosted by ongoing concerns over the reliability of Russian supplies and rocketing power prices across Europe.
Such is demand from Europe that the UK is about to receive a rare Australian LNG cargo, for the first time in at least six years, according to shipping analytics firm Kpler.
Price Reporting Agency S&P Global Platts assessed physical Japan-Korea-Marker (JKM) at a record $59.672 per mmBtu on 3 March this year, an oil equivalent of more than $325/b, while TTF prices this week have surged to over $400/b equivalent.
Demand
A report released this week by the Institute for Energy Economics and Financial Analysis (IEEFA) said sustained high prices over the past year have eroded the economic case for LNG and hurt sales in key Asian markets.
That is even though the global LNG industry has pinned its long-term hopes for growth on emerging markets in China, South Asia, and Southeast Asia, noted the report.
"Less than one year into higher prices, LNG markets are already seeing a major realignment of demand away from Asia. Should price spikes and volatility continue over the next several years, downward pressures on Asian LNG demand may accelerate, permanently impairing long-term regional demand growth," said Sam Reynolds, author of the report.
LNG sales in Asia through July 2022 have fallen more than 6% compared to last year. In China and India, two of the largest potential LNG growth markets, LNG imports have fallen 20% and 10% year-over-year, respectively.
"Exorbitant prices and unreliability of supply are undermining industry-driven narratives that LNG is a viable 'bridge fuel' from coal," Reynolds added.
