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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Asia Spot LNG Prices Hit 21-Month Low

  • Asia's LNG demand has picked up due to a slump in spot prices that recorded the lowest in nearly two years.
  • South and Southeast Asia's customers were drawn to purchasing the cheapest spot LNG prices in 21 months.
  • Prices will determine south Asian countries' continued purchases of spot LNG.
LNG

South and Southeast Asia are tentatively returning to the spot LNG market as prices have dipped from record highs in August to the lowest in nearly two years. 

India, Pakistan, Bangladesh, and Thailand were more active on the market last month than in February, looking to import cheaper LNG. Chinese demand also ticked up in March despite a still uncertain full-year LNG import trend for 2023, according to tanker-tracking data and industry players.    

China And South Asia Drive LNG Demand 

China, India, Bangladesh, Pakistan, and Thailand saw March LNG imports rise compared to February, per data from Kpler cited by Reuters’ Asia Commodities and Energy Columnist Clyde Russell. However, overall Asian imports were only slightly higher in March as the developed economies in north Asia – Japan and South Korea – reduced LNG imports at the end of the winter, as usual.  

South and Southeast Asian customers were tempted by the lowest spot LNG prices in 21 months. In the week to April 6, spot LNG prices for May delivery averaged $12.50 per million British thermal units (MMBtu), flat compared to the prior week, per industry sources estimates quoted by Reuters. The price has slumped by 67% since December 2022 and by 82% from a record high of $70.50 per MMBtu seen in August 2022, when natural gas prices spiked globally as Russia cut pipeline supply to Europe and the EU went on a buying spree to procure LNG for the winter.  

The lower LNG spot prices attracted Indian buyers. Kpler estimated that India’s imports in March had risen to 1.84 million tons, up from 1.27 million tons in February, which was the lowest monthly total since January 2017. China also raised LNG imports, to 5.55 million tons in March, compared to 4.95 million tons in February and 4.77 million tons in March 2022. 

Prices To Determine Pace of LNG Imports

Going forward, prices will determine whether south Asia will continue buying spot LNG. Intensified competition between Asia and Europe will drive prices higher, which in turn will reduce the purchasing power of price-sensitive LNG importers such as India, Bangladesh, and Pakistan. 

“Going forward, it will be a tug of war for the marginal cargo. We do see more shift of flow into Asia and of course the prices of the LNG in Europe and Asia will, to some extent decide where the cargoes will be flowing,” Oystein Kalleklev, the chief executive of shipping firm Flex LNG, said on the company’s earnings call in February.  

China, after a historic drop in LNG imports in 2022, is likely to see a recovery this year, but the rebound will depend not only on the economy after the reopening but also on prices. 

Unless natural gas prices globally remain bearish for a sustained period of time, Chinese LNG imports could stay weak this year, the biggest natural gas supplier, China National Petroleum Corporation (CNPC), says, as carried by Energy Intelligence

Booming domestic production and Russian pipeline imports would limit China’s LNG import growth, Wood Mackenzie said in an analysis last month. In the consultancy’s base-case scenario, China’s LNG imports would be 71 Mt (97 bcm) this year, just 7.4 Mt (10 bcm) more than in 2022 and still far lower than the 80 Mt imported in 2021. 

European Competition

Spot LNG pricing will depend to a large extent on Europe’s demand for the fuel. Europe continues to attract the majority of the rising U.S. LNG exports and will look to stock up on gas for next winter as it cannot rely on the weather and a second consecutive warmer-than-usual winter for lower gas withdrawals. 

Warmer winter weather and subdued LNG demand from Asia helped Europe fill storage sites to adequate levels before the heating season 2022/2023 and exit that season with inventories well above historical averages.

More than 50% full gas storage sites in April is good news for Europe’s efforts to fill up the storage ahead of the 2023/2024 winter. This will be the second winter without much of the Russian pipeline gas, but Europe hasn’t seen a truly long cold winter period without that gas yet. 

So the race will be to attract as much LNG as possible now that more LNG import terminals in Europe have started operations.  

“The EU will have to match whatever Asia is willing to pay plus a premium in a bidding war to keep LNG imports flowing to the EU,” SEB analysts wrote in a note last week.  

U.S. LNG exports hit a record high in March, with Europe attracting more than 70% of all U.S. cargoes, per Refinitiv Eikon data cited by Reuters. 

So far in April, more than 75% of the U.S. LNG cargoes have headed to Europe, according to energy data analysts at RBN Energy

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“Exports to Europe remain at ultra-peak levels,” RBN Energy noted. 

Historically, the U.S. exports more LNG to Latin America in the spring as the southern hemisphere prepares for peak winter demand, while Europe and Asia have just seen winter end. 

“Last spring and summer, U.S. LNG exports to Latin America did rise somewhat, but to a much lesser extent compared to the prior years as Europe’s demand to refill storage and replace Russian gas surged. This spring is off to a similar start, with exports to Latin America creeping up, at the expense of exports to Asia,” RBN Energy said. 

By Tsvetana Paraskova for Oilprice.com

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