Russell: Asia spot LNG prices fall as demand increases, but prior rally bites back:
Last week, the spot price for liquefied gas (LNG), in Asia, eased amid signs of seasonal demand peaking. The five-month rally has also reduced purchases by price sensitive buyers.
The price of LNG spot for delivery to North Asia fell to $13.80 per mmBtu in the week ending Aug. 23. This is a 2.1% drop from the previous week's eight-month high, $14.10.
The benchmark price fell for the first time in four weeks. However, it remains 66.3% higher than the lowest price of $8.30/mmBtu that was reached at the start of March.
The Asian LNG price has been pushed higher by heavyweight buyers like China and Japan amid a hotter-than-usual summer in the north that has increased demand for air conditioning.
According to commodity analysts Kpler, Asia's super-chilled fuel imports are on course to reach a record high of 25,03 million metric tonnes in August.
The increase is above the 23.32 millions tons of August 2012 and the 23.86 million tonnes in July.
China is the largest LNG importer in the world, and its arrivals are estimated to be 6.94 million tonnes, which is the highest since January, up from 5.91 million in July.
The majority of electricity in China is generated by coal, nuclear, and renewable energy sources.
China's increased use of LNG for trucking is what's driving the consumption. Consultants Wood Mackenzie said in a report published last month that LNG trucks sales "rose from under 10%to reach up to 30% of the market by the end of 2023".
The second largest LNG importer in the world, Japan, is driven by more traditional factors such as increased air-conditioning use. The demand for LNG in Japan, the world's No. 2 importer of LNG, is driven by traditional factors like increased air conditioning use.
Japan's imports were estimated at 5,83 million tons, up from 5,45 million tons in July. This is a five-month record.
South Korea, which is the third largest LNG importer in the world, also shows a similar pattern. Arrivals of 3,86 million tons in August were the highest since April, and an increase from 3,16 million tons in July.
INDIA, THAILAND
Looking at the price-sensitive Asian buyers, however, reveals a very different pattern. India, the fourth-largest importer in the region, is forecast to receive 2,09 million tons of wheat in August. This will be the lowest level since April, and down 18% compared to July's 2.56 millions.
Kpler estimates that Thailand's LNG imports in August fell below 1 million tonnes for the first since April. This is down from 1,04 million tons in July.
Market sources indicate that India and Thailand have not awarded spot tenders for the past few weeks, likely due to higher prices.
It is possible that the spot price may need to be further lowered to entice buyers from South and Southeast Asia to return to the market.
The demand for goods in North Asia is likely to return to the normal seasonal pattern. This typically involves a spike in demand during summer (usually August), followed by a decline in imports until late October, before resuming to meet winter demands.
The ongoing weakness in Europe's demand could also be a factor in the decline of Asian spot LNG prices.
The second largest importing continent, Africa, is expected to import 6,25 million tonnes in August, which will be the lowest monthly total for three years. This compares with 6.52 million tons in July and 8,58 million tons in August last year.
The demand for LNG is falling as natural gas stocks in the European Union reached 90% last week. This is 10 weeks earlier than the Gas Infrastructure Europe target.
The demand for natural gas in Europe is likely to have shifted structurally downwards since Europe was forced to reduce its reliance on Russian pipeline supplies following Moscow's invasion of Ukraine in February 2022.
These are the opinions of the columnist, an author for.
(source: Reuters)
