WIM spread to JKM narrows on geopolitical risks, firm Indian LNG demand

Geopolitical risks leading to tightness in shipping availability and firm LNG and natural gas demand in South Asia are supporting prices of South Asian cargoes, prompting a narrower spread between JKM and West Indian Marker (WIM).

Platts, part of S&P Global Commodity Insights, assessed the March WIM, the price for LNG cargoes delivered to West India ports, at $9.488/MMBtu Feb. 1, or at a 22.8 cents/MMBtu discount to the March JKM.

The JKM/WIM spread stood at 44.1 cents/MMBtu on Jan. 2.

The JKM/WIM spread had been in a persistently narrowing trend starting early January, as global LNG prices eased due to weak demand for LNG in the key consuming regions of Northeast Asia and Europe.

As global LNG prices eased, demand for LNG from India rose as the fuel became competitive against alternative fuels such as propane. Further, importers in India believed that prices were suitable for procurement given that the winter season typicallly sees an increase in prices.

In January, entities such as GAIL, Bharat Petroleum Corporation Limited, Indian Oil Corporation Limited, Gujarat State Petroleum Corporation, Torrent Power, Petronet and Arcelor Mittal Nippon Steel purchased cargoes from the market, highlighting the wide range of market participants that have procured LNG.

LNG demand from the power sector in India for March-October is also expected to be strong, market sources said.

“It is an election year in India so power demand for gas will be better than last year,” an Indian gas market participant said.

India’s NVVN issued a gas-based power procurement tender for 4 GW for March-October, expected to close on Feb. 6, which includes West India Marker as a pricing index.

“Some of the gas procurement by gas and power companies will also be with an eye on meeting power demand,” an India-based source working at a power company said.

Geopolitical factors
Attacks by Houthi fighters on ships in the Red Sea have led to LNG suppliers avoiding the route to deliver cargoes to Europe.

While this has prompted Middle East suppliers and traders to optimize LNG deliveries by rescheduling dates, and considering swapping volumes from the Atlantic basin, it has still led to an impact on shipping availability if demanded in the prompt, market sources said.

This is likely affecting the time for LNG cargoes in loading a vessel, delivering and making the return journey for reloading. Sources said this might be affecting prompt delivery prices for India.

WIM versus SEAM
From a different perspective, the spread between WIM and the Southeast Asian Marker, which reflects value of cargoes delivered into Southeast Asia, had also been narrowing as WIM strengthened.

SEAM held stable at a 20-30 cents/MMBtu discount to the JKM, with several market sources saying the discount could rise to 50 cents/MMBtu.
One of the market sources attributed the potentially deeper discount to the availability of cargoes around Southeast Asia, especially Thailand, the most active spot buyer in the region.

“Chinese national oil companies have a lot of floating cargoes around which can be easily diverted to other markets,” a supplier said.

Referring to several recently awarded tenders in both regions, the market source also said that it was “not normal that South Asian buyers are buying at higher prices than Southeast Asian buyers.”

Thailand’s PTT partially awarded its latest buy tender that closed Jan. 26, seeking March and April cargoes, at a 30-40 cents/MMBtu discount to JKM, according to multiple market sources.

Some recent buy tenders from Thailand had been heard awarded to Chinese national oil companies.

An industry source said prices for Thailand cargoes were determined by the origin of the cargoes, as well as whether it was a seller’s or a buyer’s market. “For now, I think it is a buyer’s market,” the source said.

Platts assessed the March SEAM at $9.463/MMBtu On Feb. 1, at a 25.3 cents/MMBtu discount to March JKM, and a 2.5 cents/MMBtu discount to the March WIM.
Source: Platts