LNG cargoes diverted away from India as industrial activity slows

4 May 2021

London (Quantum Commodity Intelligence) – The surge in coronavirus cases in India has hit demand for gas as economic and industrial activity slows, leading to a build-up in inventories with at least five liquefied natural gas (LNG) cargoes diverted away in the last few days, according to vessel-tracking sources.

Leading vessel tracking firm Kpler said currently five LNG carriers have been diverted away from India, with others awaiting instructions. Of the five vessels confirmed as diverted, two were chartered by Qatargas, two by Angola LNG and the other from India's GAIL Gas.

Sources say other vessels may also be diverted away this week.

India and China led the recovery in Liquified Natural Gas (LNG) demand following the outbreak of the Covid-19 pandemic, Royal Dutch Shell said in its annual LNG Outlook published in February.

Shell said India increased imports by 11% in 2020 as it took advantage of lower-priced LNG to supplement its domestic gas production. Shell also noted global LNG trade increased to 360 million tonnes in 2020 despite the unprecedented volatility caused by the Covid-19 pandemic.

LNG prices so far have held up, supported by inventory building in China, Japan and Korea ahead of the summer.

Late last week LNG traded close to $9.00 per million British thermal units (MMBtu). The Asian benchmark Japan-Korea Marker (JKM) last traded this above this level in the second half of January, having traded at record highs early in 2021.

Securing LNG supplies ahead of peak demand periods of the year has become a major consideration for buyers, after last winter's record volatility and spot prices which followed the sustained cold snap across North Asia in January.

JKM had been trading at below $5/MMbtu in Q4 2020, but the demand surge saw prices rally to record levels, including a cargo trading at an all-time high of around $39/MMBtu in mid-January.

North Asia typically has a second peak demand period during the summer as demand for air conditioning ramps up.