Gas Processing & LNG is Produced by Gulf Publishing Holdings LLC

Worries for LNG as prices slip amid record North Asia imports: Russell

LAUNCESTON, Australia,  (Reuters) - The spot price of liquefied natural gas (LNG) in Asia has completely missed its usual winter peak, with much of the blame being laid at the door of milder-than-usual temperatures trimming demand.

That sounds perfectly plausible, but doesn’t quite tally with the fact that delivered volumes into the major consuming region of Northeast Asia hit a record-high in December.

A total of 20.25 million tonnes of the super-chilled fuel were delivered in December to the region, which includes the top three consumers of Japan, China and South Korea, according to vessel-tracking and port data compiled by Refinitiv.

This was up 12.4 percent from the same month in 2017, adding to a 14-percent gain in shipments in November, 2018, from the same month a year earlier. It was also the most on record, eclipsing the 19.46 million tonnes from January, 2018.

China was the main driver of the jump in imports, with 6.42 million tonnes arriving in December, up 27 percent from the same month in 2017.

Top consumer Japan saw imports weaken, dropping by 9 percent to 7.72 million tonnes in December, whilst No.3 South Korea recorded an 11-percent increase to 4.81 million tonnes.

The shipping data does show that LNG demand was strong for the first part of the northern winter, but it doesn’t yet give a picture of how the rest of the cold season will play out.

It’s here that the spot pricing comes into play, and this is pointing to a weak back-end of winter.

The spot price for cargoes delivered to Asia LNG-AS was $8.50 per million British thermal units (mmBtu) in the week ended Jan. 11.

It has been trending down since a minor early winter peak of $10.90 per mmBtu in the week to Nov. 16, and is well below the summer-high of $11.60, reached in the week to June 15.

The spot price is usually for deliveries of around four to eight weeks in advance, so the current price reflects cargoes that will arrive in February.

It’s worth noting that the $10.90 reached in mid-November reflected cargoes delivered in December, when demand reached an all-time high in Northeast Asia.


The fact that even this strong demand couldn’t spark a sustained rally in prices shows that it’s more likely ample supply is playing a greater role than demand.

This view is supported by spot prices for March delivery, at around $8.30 per mmBtu, being weaker than those for February.

There is usually a sharp drop in spot LNG prices as winter ends and the market enters the lower-demand shoulder season of spring, and the strength of any summer recovery is largely dependent on how hot the weather is, as this drives power demand for air-conditioning.

The fact that the winter rally in LNG prices didn’t materialise, even in the face of solid demand growth, raises the possibility of a weaker-than-usual first-half.

The market narrative of LNG has swung in recent months from one of an expected oversupply on the back of a raft of new projects mainly in Australia and the United States, to a consensus that strong demand growth in Asia will lead to a deficit in coming years, unless new ventures are sanctioned.

However, while this view may well be correct from a longer-term perspective, it doesn’t preclude the possibility of short- to medium-term periods where supply exceeds demand.

These include two Australian projects in Inpex’s 8.9 million tonnes per annum Icythys venture and Royal Dutch Shell’s Prelude floating plant, as well as Dominion’s Cove Point and Cheniere’s Corpus Christi projects in the United States.

While the longer-term outlook for LNG demand growth appears to be rosy once again, the market may have little bouts of indigestion every now and again, as it has to absorb the lumpy nature of supply additions.

Editing by Joseph Radford

Copyright © 2019. All market data is provided by Barchart Solutions. Futures: at least a 10 minute delay. Information is provided 'as is' and solely for informational purposes, not for trading purposes or advice. To see all exchange delays and terms of use, please see disclaimer.

                                  CMEGroup                                     Icelogo


Editorial Comment
-Adrienne Blume
The $26-B small-scale LNG market is gaining exciting traction this year.
Regional Focus: Singapore moves closer to becoming a global LNG trading hub
-Eugene Gerden
Amid strong demand for LNG in the Asia-Pacific region and the need to secure regular gas supplies on a large scale, Singapore may become a major regional hub for LNG trade.
Show Preview
-Adrienne Blume
For the third time in its 47-yr history, Gastech is returning to Houston, Texas.

Reliable Operations & Saving OPEX for Gas Plant Refrigeration – Selecting the right technologies

Register Now

By selecting integrally geared turbocompressors for gas plant refrigeration duty coupled with a mag bearing turboexpander, operators get the added values of technology with highly reliable operations and reduced OPEX. Join Sami Tabaza and Chris Blackmer from Atlas Copco Gas and Process for a presentation followed by Q&A surrounding the turbocompressor and turboexpander technologies that can efficiently and reliably fit your gas plant design and operation to get the advantages of both technologies.

June 18, 2019 10:00 AM CDT

Register Now


Please read our Term and Conditions, Cookies Policy, and Privacy Policy before using the site. All material subject to strictly enforced copyright laws.
© 2019 Gulf Publishing Holdings LLC.