Factbox: Asian spot LNG prices hit record highs on supply glitches, demand spike
Asian spot LNG prices have risen to unprecedented levels due to February cargo shortages, transportation bottlenecks, supply outages and record winter temperatures boosting end-user demand.
Futures signal JKM prices could ease for March delivery but a looming cold snap in the Northern Hemisphere in the US and Europe present significant upside risk for global gas markets.
** The S&P Global Platts JKM for February was assessed at a record high of $32.494/MMBtu on Jan. 12. This is the highest for the LNG benchmark for Asian spot LNG since it was launched in early 2009.
** On Jan. 11, JKM rose by $6.768/MMBtu, or 31% from the previous day, the most it has ever risen in a single day, on the back of competitive bids for February cargoes reported during the Platts Market on Close assessment process.
** Spot prices are much higher than oil-linked term LNG prices that are at around $8-$9/MMBtu at current oil prices of $56/b. The current Brent crude price in MMBtu is around $9.7/MMBtu at a conversion rate of 5.8 MMBtu per barrel.
** In northern China, trucked LNG prices surged to around $28/MMBtu around Beijing, Tianjin and Hebei, nearly doubling in a single week due to a third cold snap and local supply disruptions.
** Low spot availability, Panama Canal restrictions and ice conditions in North Asian ports have contributed to LNG shipping rates hitting a multi-year high with prices hitting $300,000/day in January. In the week of Jan. 11, the Atlantic day rate was at $250,000/day and Asia Pacific day rate was at $175,000/day.
** In Japan, day-ahead power prices breached Yen 220/kWh, or $618/MMBtu on Jan. 12, Japan Electric Power Exchange data showed. This compares to around Yen 100/kWh a week earlier and single digit price levels in December, indicating a surge of more than 40 times.
** The spread between the FOB Singapore marine fuel 0.5% assessment and the FOB Singapore 380 CST high sulfur fuel oil assessment hit a 10-month high Jan. 12 at $101.36/mt, on the back of climbing demand for low sulfur fuel oil as LNG prices hit historic highs.
** China’s northern provinces faced multiple cold waves since December causing energy shortages and forcing utilities to deploy all energy sources available. In the first week of January, Beijing recorded the coldest temperature since 1966 and other provinces hit their lowest mercury level on record.
** On Jan. 8, China’s State Council said in a meeting chaired by Premier Li Keqiang that efforts were being redoubled to shore up coal, electricity and natural gas supplies for residential heating in winter, Xinhua reported.
** Japanese utilities facing gas shortages have cut back on surplus electricity sales on its power exchange, and resorted to burning more coal and fuel oil, in addition to procuring more spot LNG at high prices. Solar power has been severely hit due to winter storms.
** Japan last week announced a month-long state of emergency in Tokyo and three adjacent prefectures, boosting residential energy demand. This is expected to expand to more prefectures, covering over 55% of the entire population.
** Japan’s power demand rose by 13% year on year for the first week of 2021, averaging 108 GW, with the 3.5% increase in December also supported by cold weather, S&P Global Platts Analytics said. Some regions saw a 20% increase and the cold has been amplified by the need to keep windows open for circulation amid COVID-19 spread.
** South Korea’s electricity demand jumped to a wintertime high and state-run Korea Power Exchange, or KPX, has been on high alert. Temperatures in Seoul dropped to minus 18.6 degree Celsius in early January, the lowest in 35 years , according to Korea Meteorological Administration.
** Panama Canal passage wait times for Asia-bound LNG tankers from the US Gulf Coast without reservations were as much as 13 days at the end of 2020.
** P&I Clubs have warned of worsening ice conditions at China’s northern ports such as Yingkou, Jinzhou, Huludao, Dandong, Qinhuangdao, Tangshan, Weifang and Dongying that could disrupt vessel arrivals and cargo discharge.
** Shell has resumed loading of LNG cargoes from its Australian Prelude FLNG project after it was suspended in early 2020, allowing it to benefit from record high LNG prices. Meanwhile, Chevron’s Gorgon LNG has found weld issues at its Train one, which is likely to extend overall maintenance further.
** Pakistan’s national grid suffered a major outage on Jan. 9, after a technical fault that tripped the power transmission system and led to the shutdown of power plants.
** Pakistan LNG received some of the highest price offers on record for its recent tenders; its February tender saw traders offer cargoes at as much as 32.5% Brent slope.
** Malaysia’s Bintulu LNG export facility has faced production problems at several trains and Indonesian LNG exports are in a structural decline due to upstream gas production issues.