Russell: Asia LNG spot price falls as demand peaks, previous rally weakens
By Clyde Russell
LAUNCESTON, Australia, August 26 (Reuters) – The spot price of liquefied natural gas (LNG) in Asia fell last week amid signs that seasonal demand may be peaking and the five-month recovery is reducing purchases by price-sensitive buyers.
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The spot price of liquefied natural gas for delivery to North Asia fell to $13.80 per million British thermal units (mmBtu) in the week ended August 23, down 2.1 percent from the eight-month high of $14.10 hit the previous week.
It was also the first time in four weeks that the reference price fell. However, it is still 66.3 percent above this year’s low of $8.30 per mmBtu, reached in early March.
Prices for liquefied natural gas in Asia have been driven up by strong demand from major consumers such as China and Japan. The unusually warm summer in the north has also fuelled demand for electricity for air conditioning.
According to data from commodity analyst Kpler, Asia’s imports of the frozen fuel are expected to hit a seven-month high of 25.03 million tonnes in August.
This is an increase from 23.86 million tonnes in July and also above 23.32 million tonnes in August last year.
Much of the increase comes from China, the world’s largest LNG importer, whose imports are estimated at 6.94 million tonnes in August, the highest since January and up from 5.91 million in July.
Although China’s electricity demand is increasing due to hot weather, only small amounts of liquefied natural gas are used to generate electricity. The majority is covered by coal, renewable energy sources and nuclear energy.
Rather, it is China’s increasing use of LNG in trucking that is driving consumption. Consulting firm Wood Mackenzie said in a report last month that LNG truck sales “have risen from under 10% to as much as 30% of the market in the final months of 2023.”
In Japan, the world’s second-largest liquefied natural gas importer, demand for liquefied natural gas (LNG) is driven by more traditional factors, such as the increasing use of air conditioning.
Japan’s imports were estimated at 5.83 million tonnes in August, a five-month high and up from 5.45 million tonnes in July.
South Korea, the third-largest LNG importer, saw a similar pattern: the 3.86 million tonnes delivered in August were the highest since April and an increase from the 3.16 million delivered in July.
INDIA, THAILAND
However, when looking at more price-sensitive Asian buyers, a different pattern emerges: India, the region’s fourth-largest importer, is forecast to import 2.09 million tonnes in August, the lowest since April and down 18 percent from 2.56 million tonnes in July.
Thailand’s LNG imports fell below the one million tonne mark in August for the first time since April. Kpler estimates that a total of 880,000 tonnes were imported, down from 1.04 million tonnes in July.
Higher prices are likely to have curbed imports from India and Thailand, as market sources say utilities in both countries have not issued spot tenders in recent weeks.
This suggests that spot prices may need to fall further to attract buyers in South and Southeast Asia back to the market.
In addition, demand in North Asia is likely to return to its normal seasonal pattern, which typically peaks in summer, mostly in August, followed by declining imports until October before arrivals pick up again to meet winter demand.
Another factor that could lead to a decline in LNG spot prices in Asia is the continued weak demand in Europe.
The second-largest importing continent is expected to import 6.25 million tonnes in August, the lowest monthly volume in three years and a decline from 6.52 million in July and 8.58 million in August last year.
Demand for liquefied natural gas (LNG) is falling as European Union natural gas stocks reached 90 percent of target last week, ten weeks ahead of the target set by Gas Infrastructure Europe.
It is also likely that Europe’s natural gas demand has structurally declined since the continent had to reduce its dependence on pipeline supplies from Russia following Moscow’s invasion of Ukraine in February 2022.
The opinions expressed here are those of the author, a Reuters columnist.
