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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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Is This Big Story in Energy Already Fading?

One of the most critical indicators in global oil and gas markets is falling. Having hit multi-year lows this week--right under the noses of most investors.

That's the so-called JKM Marker. A measure of prices for liquefied natural gas (LNG) in the key Asian markets of Japan and Korea.

Platts reports that the JKM Marker fell another 10 cents this week. Dropping to $10.575 per MMBtu. That's a critical level--representing the lowest price for Asian LNG seen since March 11, 2011.

If that date sounds familiar, it should. March 2011 was the exact time when the massive Tohoku earthquake struck Japan. Triggering the Fukushima nuclear incident, and shutting down the entire Japanese atomic energy sector.

That outage in turn had a massive impact on Japanese LNG demand. With importers falling over themselves to secure supply--in order to keep the lights on without go-to nuclear power running across the nation.

LNG prices thus soared. With the JKM marker topping $20 per MMBtu earlier this year--up from less than $10 just a few months before the Tohoku quake.

But this week's price action suggests those levels may be as good as it's going to get for Asian LNG. JKM Marker prices have been in steady freefall over the last several months.

Now having finally re-trenched to pre-quake levels.

The interesting thing is, this decline is happening even as Japanese nuclear reactors continue to stand idle. Suggesting that buyers here may be holding off on LNG purchases in anticipation of a possible nuclear re-start.

If such an event does emerge, it could send Asian LNG prices to even lower levels.

One counter-veiling force could be summer heat in big Japanese cities like Tokyo. With high temperatures expected to boost energy demand here.

We'll see if that's enough to get LNG prices headed higher over the coming months.

However, even such a boost is likely to be short-lived. Meaning prices could well remain depressed relative to the lofty levels of the past three years.

That would be a major shift for global energy markets--especially worldwide LNG projects.
Here's to returning to normal,

Dave Forest




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Leave a comment
  • AkramMajed on August 06 2014 said:
    JKM Marker & LNG are just declining and they really have to be retrenched.

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