Asian spot prices for liquefied natural gas (LNG) plummeted to multi-year lows this week, pressured by a lack of demand to consume abundant supplies. As milder-than-usual winter in both Asia and Europe is curbing demand, there were deals done below $4.00 per million British thermal units (mmBtu) this week, the lowest level in more than 10 years.
The average LNG price for March delivery into northeast Asia was estimated at around $4.00 per mmBtu, down $0.60 per mmBtu from the previous week, several sources said. “Warm winter is a clear reason for such a low price,” an LNG trader said.
The Brunei LNG export plant sold a cargo for March 30-31 delivery at about $3.90 to $3.95 per mmBtu earlier in the week. Commodity trader Vitol sold a cargo to BP on Friday for March 22-26 delivery at $3.95 per mmBtu in the S&P Global Platts Market on Close window.
The deal prices are at their lowest level in Asia since summer 2009, according to data from S&P Global Platts that assesses the Japan-Korea-Marker (JKM) price. With the first half of March holding a slight premium to late March, the average price for that month is at the lowest level since April 2016, according to the same data. Demand is expected to remain low in Asia next week, with Chinese buyers largely out of the market due to the Chinese New Year and Spring Festival holidays.
With the global gas market heavily oversupplied, new cargo offers further saturated the market. Several sellers issued multi-cargo tenders this week, with a number of one-cargo offers on the market as well. Russia’s Gazprom has offered 18 cargoes for loading at Belgium’s Zeebrugge terminal between the second half of Feb. 2020 and Dec. 31 2021. The offer is for cargoes that Gazprom Marketing and Trading buys from Russia’s Yamal LNG, market sources said. Initially, the 2.9 million tonnes per year volumes agreed in the deal were expected to be supplied by Gazprom to the Asia-Pacific markets, mostly to India, according to the company’s statement from 2015.
Japan’s Osaka Gas has offered two cargoes for delivery to Europe in July and November from the Freeport LNG project in the United States as demand in Japan is subdued due to mild weather this winter. Another offer came from Indonesia’s Bontang plant for three cargoes loading between February and April. Indian buyers, whose purchasing power depends on price levels, have flooded the market seeking cargoes, market sources said. But this was not enough to reduce global oversupply.
“At such low prices, demand has risen,” one of the buyers in the country said. Gujarat State Petroleum Corp (GSPC) issued several tenders seeking cargoes for February and March as well as between April and October, market sources said. Gail India was looking for a February cargo into India and also offered a cargo from its Cove Point offtake in the United States.