- Platts JKM crosses $16/MMBtu, first time in Northern summer since 2013
- JKM likely to remain supported at or above current levels: Platts Analytics
- China’s trucked LNG prices around Yuan 5,200/mt
Asia’s spot LNG prices soared to new summer highs this week supported by strong regional demand and surging gas prices in European gas hubs, with tight fundamentals meaning there is little prospect of prices easing from current levels, says an article published in Platts.
Spot LNG delivered
The past week saw spot LNG delivered to Northeast Asia crossing $16/MMBtu for the first time during the Northern Hemisphere summer in eight years. The S&P Global Platts JKM was assessed at $16.155/MMBtu on Aug. 5 for September delivery cargoes, compared to around $3.2/MMBtu at this time last year, and around $4.2/MMBtu in 2019.
“JKM is likely to remain supported at or above current levels in the weeks ahead amid a tight fundamental market,” Jeff Moore, manager for LNG analytics at S&P Global Platts, said.
Carbon price correction
“Spot prices are unlikely to see significant downward pressure in the coming months unless there is a strong correction in coal or carbon prices, which would allow for European hub prices to move lower,” Moore said.
European benchmark TTF prices
Traders and buyers in Asia were already looking to European benchmark TTF prices to guide their spot purchases for the shoulder months, and early inquiries showed some of the market attention was already shifting to the winter gas heating season.
The TTF contract for September was assessed by Platts at $14.925/MMBtu on Aug. 5, holding above $14/MMBtu — a level not seen in recent years.
Low Europe’s storage stocks
Europe’s storage stocks are at their lowest ever for this time of the year, according to Platts Analytics, which has fed buyers’ appetite for spot LNG cargoes amid uncertainty over incoming piped gas volumes from Russia heading into the winter. This has intensified the competition between the Atlantic and Pacific basins for cargoes.
Strong demand
Spot demand from India surprised the market with Petronet LNG and Indian Oil Corp closing tenders for two cargoes in the high $15/MMBtu range for August and September delivery to Dahej.
LNG imports
One trader described these deals as “technical buys to cover positions,” possibly to meet demand from fertilizers and chemical production, two sectors driving India’s LNG imports. Indian buyers have generally refrained from spot LNG purchases at high prices given the availability of alternative energy sources like coal.
A tender by Pakistan State Oil was awarded on Aug. 5 to Qatar Petroleum Trading at a slope of 22.1311% of Brent, or around $15.93/MMBtu, and bids by traders Vitol and Guvnor at slopes of 24-28%, which were relatively high despite the end-August prompt delivery.
Further east, the summer heatwave has driven up gas-fired generation, in some cases prompting south Chinese utilities to return to the spot market.
Hotter summer
“This summer feels hotter than usual, some power plants have ramped up operation rates to 90% in our region,” a source with a southern China-based utility noted, adding that Chinese NOCs were heard seeking additional cargoes to supply domestically.
“There’s hot weather, a typhoon, too many variables… we have to ensure that there’s sufficient gas supplies downstream in case the weather turns hotter,” a major Chinese LNG buyer said.
LNG price rise
Spot selling activity from multiple Chinese companies, including the NOCs and a couple of second-tier players, was heard to have stopped as domestic demand picked up and ex-terminal trucked LNG prices rose significantly.
The ex-terminal trucked LNG prices across terminals in China increased to around Yuan 5,200 /mt on July 30, equivalent to around $13/MMBtu, on the back of higher import costs and reduced truck send-outs following the onslaught of Typhoon In-fa in east China, domestic sources said.
This would be $2/MMBtu higher than the average of the July JKM, which settled at $10.924/MMBtu.
Japan and South Korea
Japan and South Korea have supported Asian LNG demand with power consumption jumping 10% and 13% respectively this July from last year, Platts Analytics data showed.
Japan’s buying interest however has been relatively muted of late as JKM surges prompted several market participants to take stock of their positions. In South Korea too, several LNG buyers expressed hesitancy in entering the spot market.
“Many of us are monitoring [the market], price is an issue… [Let’s] wait and see for now, we are unclear on the price direction for the near term,” a South Korean buyer said.
Dependence on gas-fired power
Japan’s dependence on gas-fired power generation has reduced since seven nuclear power plants restarted, up from two to three last winter.
“The worst of Japan’s summer heat is also now over though the heat wave in South Korea will last until the end of August,” Andre Lambine, senior power analyst at S&P Global Platts Analytics, said.
Higher nuclear capacity
South Korea also boasts higher nuclear capacity this summer but was exposed to outages at three plants during July. Still, the country is looking to shore up LNG inventories and high prices will pose challenges.
Restock for winter again!
“Demand from Asia is not for strategic storage purposes now, it’s a heat wave, high gas-fired power generation… then when they run through their inventories [after summer], they would have to restock for winter again,” a Singapore-based trader said.
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Source: Platts
