Asia Spot LNG Prices for November Delivery Up 4.1% on Looming Demand

On a year-over-year basis, November prices were up 22.0%

By MarEx 2013-10-18 11:30:00

Prices of liquefied natural gas (LNG) for November  delivery to Asia rose 4.1% to an average $15.864 per million British thermal units (/MMBtu), as North Asian utilities increased storage levels ahead of the peak winter demand season, according to the latest monthly Platts Japan/Korea Marker (JKM), which reflects month-ahead delivery. The monthly average Platts JKM for delivery in November was assessed from September 16 to October 14.

The increase in the November Platts JKM followed and partially reversed a 4.8% price decrease from the previous month to $15.235/MMBtu for October delivery. 

On a year-over-year basis, the average November JKM was up 22.0% from the November 2012 average of $13.005/MMBtu.

“Trading for November delivery started slowly as buyers chose to remain on the sidelines and wait for clearer price indications for shoulder-month cargoes between the summer and winter cooling and heating seasons,” said Sarah Cottle, global editorial director of power at Platts, a leading global energy, petrochemicals and metals information provider. “But a heightened contango* in pricing for December delivery enticed buyers with spare tank space to step up purchases for end-November,  as they looked to build inventories ahead of December.”  

Spot demand from the utilities had been largely subdued in the early part of the month, but North Asia buyers began looking ahead to winter fundamentals and the potential inability of spot supplies to meet increased winter demand from Japan, South Korea and China. This put upside pressure on prices, as did Argentina’s buy tender for 50 cargoes in 2014.

Meanwhile, thermal coal and fuel oil – also used to fuel Asian utilities and substitutes to LNG – registered year-over-year price declines for November delivery. Month-over-month prices were lower as well. According to Platts’ latest data, assessed from September 16 to October 14, thermal coal prices for November delivery were down 3.5% from October and fuel oil down 2.1% from October.

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’ monthly reports on Asia LNG prices and market developments are typically published shortly after the 15th of each month.

* Contango is the industry term for the condition whereby prices for nearby delivery are lower than prices for future-month delivery.

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