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Higher Spot LNG Prices Could Soften Asian Imports This Summer

While Asia’s LNG imports in May are set to exceed prior-year levels, purchases in price-sensitive buyers in South and Southeast Asia could soften going forward as the average spot prices in the continent rallied to a five-month high last week.

Overall, LNG imports into the world’s top importing region, Asia, are on track to hit 23.61 million metric tons in May, slightly up from 23.23 million tons in April and noticeably higher than the 20.75 million tons imported in May last year, per data from commodity analysts Kpler cited by Reuters columnist Clyde Russell on Monday.

India has shown strong LNG imports in the past weeks, while the biggest buyers – China, Japan, and South Korea – are all set to import lower volumes in May than they did in April, according to the Kpler data.

India and another importer in South Asia, Pakistan, are on track to boost their LNG imports this month compared to April.

However, the cargoes arriving in May have likely been contracted in March or April, when Asia’s LNG prices were not rallying as much as they are now.

The average spot price for the front-month delivery into North Asia jumped from around $8.30 per million British thermal units (MMBtu) at the end of February – the lowest in nearly three years – to over $12 per MMBtu last week—the highest price in more than five months.

Earlier in May, heat waves in some parts of Asia – including India – and forecasts of above-average temperatures in Southeast Asia and China in the coming weeks prompted more spot LNG buying, which has raised the spot prices in Asia to the highest level since early January. An ongoing heatwave in India, Vietnam, and other countries in south and Southeast Asia have prompted higher demand for spot LNG cargoes from utilities.

Last week, the spot LNG price hit $12.30 per MMBtu, the highest level since the middle of December 2023, and a jump from $10.90/MMBtu in the week to May 17.  

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The rally in prices could now prompt price-sensitive buyers such as India and Pakistan to scale back imports in the coming months as they could be wary of contracting supply at the current prices.   

By Tsvetana Paraskova for Oilprice.com

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