Spot LNG prices for August delivery fell 26.5% from 2013 on oversupply: Platts

The data reflects the daily Platts JKM for August assessed between June 16 and July 15, and is expressed as a monthly average

July 17, 2014 8:53 IST | India Infoline News Service
Prices of spot liquefied natural gas (LNG) for August delivery to Asia plummeted 26.5% year-over-year to an average $11.365 per million British thermal units (/MMBtu), the lowest monthly average since April 2011, the latest Platts Japan/Korea Marker (JKM) for month-ahead delivery showed. The drop came as supply continued to outweigh demand.
The data reflects the daily Platts JKM for August assessed between June 16 and July 15, and is expressed as a monthly average. The average Platts JKM for August fell year-over-year, and 12.2% month-over-month, despite the start of the traditional peak summer demand season in northeast Asia.
“High inventories resulting from a warmer than expected winter, coupled with lower end- user demand, have left most buyers in Asia amply covered by their term contracts, reducing the appetite for spot cargoes,” said Stephanie Wilson, managing editor of Asia LNG at Platts, a leading global energy, petrochemicals and metals information provider and a premier source of benchmark price references.
The $1.05/MMBtu fall for August delivery marked the fifth consecutive month of decline since the JKM hit an all-time high of $20.20/MMBtu for March delivery on the assessment date of February 14 2014, Platts data shows. Since then, the JKM has dropped more than 47%.
The August 2014 JKM was the lowest since April 2011, when the average price was $9.961/MMBtu. The daily spot JKM was assessed at $12.075/MMBtu at the start of the August 2014 assessment period and lost $1.05/MMBtu by month’s end to $10.70/MMBtu. This is the lowest daily spot price seen since March 11, 2011 when the JKM was $9.90/MMBtu. The spot JKM had spiked to $10.95/MMBtu on March 15, 2011 in the wake of the Great Eastern Earthquake and resulting Fukushima crisis in Japan.
“The ExxonMobil-led Papua New Guinea integrated LNG project has been seen as a bearish factor on the spot market,” Wilson said. “The added supply has contributed in part to pushing down spot prices. With Korea Gas still long on cargoes and a potential restart of Kyushu’s Sendai 1 and 2 nuclear reactors in Japan looming, sentiment looks bearish in the near term.”
The price of fuel thermal coal – a possible competing fuel – was lower by 3.9% on a month-over-month basis, while fuel oil was up by 0.2% over the June 16 to July 15 assessment period.
The Platts JKM is an assessment of LNG prices for spot cargoes delivered to Japan and South Korea, based on the most recent trades and/or bids and offers from buyers and sellers in the open market prevailing at the close of the trading day. The monthly JKM assessments are month-ahead delivered prices and are an average of the daily JKM price assessments reported by Platts.

Platts Spot JKM and Substitute Fuel Prices (Monthly Averages)*
Aug-13 Aug-12 Jul-13 Year-over-Year Change % Month-over-Month Change %
JKM ($/MMBtu) 11.365 15.464 12.951 -26.5 -12.2
Qinhuangdao coal ($/MMBtu) 3.61 4.00 3.76 -9.6 -3.9
180 CST fuel oil ($/MMBtu) 15.80 15.67 15.77 0.8 0.2
Source: Platts

*Referred to as month-ahead, the figures in the table are monthly averages of daily values assessed by Platts from June 16th to July 15th. The Platts JKM rolls on the 16th of each calendar month

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