Platts JKM: October Spot LNG Prices on the Rise

Prices of spot liquefied natural gas (LNG) for October delivery to Asia gained 19.8% on a month over month to an average $12.826/MMBtu per million British thermal units (/MMBtu), according the latest Platts Japan/Korea Marker (Platts JK) for month-ahead delivery released yesterday at the 2014 Platts LNG Forum in London.

This marked the first month-over-month increase in the Platts JKM since March 2014, triggered in large part by renewed buyer interest in October cargoes given the building contango in the peak winter months’ pricing, Platts said.  The data reflects the daily Platts JKM for October as assessed between August 16 and September 15, and expressed as a monthly average.

The Platts JKM began the trading month at $12/MMBtu (delivered-ex ship) for October delivery, before gaining more than 14% and closing the month at $13.70/MMBtu. The sustained uptrend in prices has been swift, with spot LNG prices gaining more than 30% in value since the Platts JKM price bottom of $10.525/MMBtu on assessment date August 4 for September delivery. This was the lowest price in three years.

“There’s a clear contango into the traditionally stronger winter season in northeast Asia, and this has brought some buyers back into the market to purchase October spot cargoes ahead of an anticipated rebound of prices in November,” said Stephanie Wilson, managing editor of Asia LNG at Platts.

However, at $12.826/MMBtu, the October Platts JKM was still down 15.8% in year-over-year comparisons and was the lowest monthly average for the month of October since 2010.

“Moderate temperatures over the summer and lower-than-anticipated downstream energy demand – particularly in Japan and South Korea – have also kept buyers’ inventories high, such that the appetite for cargoes amongst traditional northeast Asian buyers has remained quite weak,” Wilson explained.

According to Platts’ market sources, the strength of the rebound remains questionable, given excess incremental cargoes in the Asia-Pacific basin and an overhang of 10-17 cargoes from Korea Gas Corp.

Platts added that the prices of competing fuels were down month over month. Thermal coal and fuel oil were down 0.5% and 1.4%, respectively, during the August 16 to September 15 assessment period.

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Source: Platts, September 19, 2014; Image: Hoegh LNG