Tightening Asian market driven by LNG supply disruptions, not surging demand

JKM rose to its highest since March 30 and was assessed at $2.483/MMBtu on July 21. The support comes as the assessment window rolled into September along with a tightening Asian market where supply disruptions are outweighing sluggish regional demand growth.

LNG cargo loadings during the week of July 20th fell more than 60 million cu m/d on the year on a rolling 30-day moving average basis, the sharpest year-on-year drop so far in 2020.

The fall is almost entirely attributed to a maintenance at Gorgon, along with lower output from Sakhalin in recent weeks. Sakhalin’s loadings have picked up in recent days, indicating an end to the facility’s maintenance. However, the maintenance at Gorgon was officially set to end on July 11, but the facility has only loaded five cargoes this month-to-date, just half what it exported a year earlier.

Output could be curbed further as the facility reported faulty equipment but exact dates of how long it could be prolonged are unknown. However, there are significant volumes at risk as the facility usually loads close to 1.9 Bcm (60 million cu m/d) during August, and assuming similar disruptions to supply are in effect during the month, could translate to 30 million cu m/d of supply losses.

This would help to continue to provide support for the JKM despite weaker demand across the region as cooler–than-normal temperatures and a wetter start to summer are slowing weather-related consumption.
Source: Platts