Asian spot LNG prices fall as demand peaks, erasing earlier gains: Russell
Clyde Russell
LAUNCESTON, Australia, Aug 26 (Reuters) – Liquefied natural gas (LNG) spot prices in Asia fell last week amid signs that seasonal demand is peaking and a five-month surge saw price-sensitive buyers reduce purchases.
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Spot LNG prices for North Asia fell to $13.80 per million British thermal units (mmBtu) in the week to August 23, down 2.1% from an eight-month high of $14.10 the previous week.
It was the first decline in four weeks for the benchmark price but it remains 66.3% higher than the year-to-date low of $8.30 per mmBtu hit in early March.
LNG prices in Asia are rising on strong demand from major buyers such as China and Japan as a warmer-than-usual Northern Hemisphere summer stimulates demand for electricity for air conditioning.
Asia's imports of the super-chilled fuel are expected to hit a seven-month high of 25.03 million tonnes in August, according to data compiled by commodity analytics firm Kpler.
This is up from 23.86 million tonnes in July and higher than the 23.32 million tonnes recorded in August last year.
Most of the increase was driven by China, the world's largest LNG importer, which imported an estimated 6.94 million tonnes of LNG in August, the highest since January and up from 5.91 million tonnes in July.
Extreme heat has increased demand for electricity in China, but only a small amount of LNG is used to generate power, with most being supplied by coal, renewable energy and nuclear power.
Rather, it's China's growing use of LNG in trucking that's driving consumption, with consultancy Wood Mackenzie saying in a report last month that LNG truck sales “rise from less than 10% of the market to 30% by the second half of 2023.”
Japan, the world's second-largest LNG importer, has seen its LNG demand driven by more traditional factors such as increasing use of air conditioning.
Japan's imports in August were estimated at 5.83 million tonnes, the highest in five months, up from 5.45 million tonnes in July.
A similar trend was seen in South Korea, the world's third-largest LNG importer, which imported 3.86 million tonnes of LNG in August, the highest since April and up from 3.16 million tonnes in July.
India, Thailand
But a different pattern emerges when looking at price-sensitive Asian buyers: India, the region's fourth-largest importer, is forecast to import 2.09 million tonnes in August, the lowest since April and down 18% from 2.56 million tonnes in July.
Thailand's LNG imports in August fell below 1 million tonnes for the first time since April, with Kpler estimating they would fall to 880,000 tonnes from 1.04 million tonnes in July.
The higher prices are likely to have curbed imports from India and Thailand, with market sources saying power companies in the two countries have failed to win spot bids in recent weeks.
This suggests that spot prices may need to fall further to lure South and Southeast Asian buyers back into the market.
North Asian demand may also return to its normal seasonal pattern, peaking in the summer, usually in August, followed by a decline in imports until October, when imports will then increase again to meet winter demand.
Another factor that could lead to lower Asian spot LNG prices is continued weakness in demand in Europe.
The second-largest importer, the continent, is expected to import 6.25 million tonnes in August, the lowest monthly figure in three years, down from 6.52 million tonnes in July and 8.58 million tonnes in August last year.
LNG demand is falling as European Union (EU) natural gas inventories hit 90% of their target last week, 10 weeks ahead of the target set by Gas Infrastructure Europe.
There may also be a structural decline in European natural gas demand as Moscow's invasion of Ukraine in February 2022 has forced the continent to reduce its reliance on pipeline supplies from Russia.
The opinions expressed here are those of the author, a Reuters columnist.
