Platts: Asia August LNG Spot Prices Rise

Monthly average prices of liquefied natural gas (LNG) for August delivery to Asia rose by 6.8% from July, reaching $15.46 per million British thermal units (/MMBtu) as increased summer demand in North Asia was met with limited spot availability in both basins, according to the latest monthly Platts Japan/Korea Marker (JKM) data for month-ahead delivery.

The monthly average of the Platts JKM for delivery in August was assessed over the period of June 17 to July 15.

This is the first month-on-month gain in the monthly average JKM after it peaked at $19.139/MMBtu for March deliveries. The average August JKM was also 2.9% higher from a year earlier, breaking the consecutive year-on-year drop in the monthly average JKM recorded from May to July.

Prices of Platts JKM for August delivery climbed as North Asian buyers increased inventories to cover summer spot requirements. Meanwhile, higher-than-expected temperatures in the region supported higher LNG demand for power generation purposes. Mean temperatures in June hit 22.6 degrees Celsius in South Korea – the highest level recorded for the month since 1973 according to data from the Korea Meteorological Administration. Neighboring Japan also experienced warmer-than-average weather.

However, the main driver for the steeper gains in August JKM came towards the end of the assessment period due to the third force majeure of the year at Nigeria LNG. As many as 15-20 cargoes had reportedly been lost from the facility, with delays to many others reported following a 21 day blockade of the loading port by the Nigerian Maritime Administration and Safety Agency over a dispute regarding unpaid fees.

“Numerous traders and sellers found themselves short due to the supply disruptions in Nigeria and started bidding up for replacement cargoes, especially for late July and first-half August delivery,” said Sarah Cottle, editorial director of power, Asia and Europe, for Platts, a leading global energy, petrochemicals and mmetals information provider and a premier source of benchmark price references.“Strong demand amid limited availability of spot cargoes for immediate delivery drove pricing offers higher. This was particularly noticeable in the bid/offer activity in the Atlantic basin, where a large portion of available supply was already committed to term buyers who exercised their ‘upward quantity tolerance’ clauses earlier in the year.”

August spot prices for thermal coal and fuel oil – which Asian utilities can use as substitutes for LNG – remained on a downward slide. Thermal coal prices dropped 0.9%, while fuel oil also saw a 0.4% decline, according the Platts’ latest month-over-month data for August.

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LNG World News Staff, July 21, 2013