Asian 2024 LNG MOC hits record highs on increased optimization, participation

Asian LNG trading activity during the Platts Market on Close cargo and derivatives assessment process hit record highs in 2024, due to increased portfolio optimization opportunities and greater market participation as Platts Japan-Korea Marker prices stabilized following spikes in 2022 in the wake of the Russia-Ukraine war.

The total number of bids, offers and trades reported during the cargo MOC in 2024 jumped 175.2% to a record high of 2,477.

Activity in the derivatives MOC also reached an all-time high during the year, with 16,548 bids, offers and trades, surging 121.6%.

Less volatile JKM prices attracted more traders due to the reduced risks associated with lower price fluctuations and improved predictability of future price movements, according to market sources. The increased market liquidity also drew more participants, facilitating easier entry and exit from positions.

Platts, part of S&P Global Commodity Insights, assessed JKM, the benchmark price for cargoes delivered to the Japan-Korea-Taiwan-China (JKTC) region, between $7.981 and $15.591/MMBtu in 2024, narrowing from assessment ranges of $8.399/MMBtu to $23.901/MMBtu in 2023 and $18.945/MMBtu to $84.762/MMBtu in 2022.

Platts JKM averaged $11.912/MMBtu in 2024, down from $13.775/MMBtu in 2023 and $33.979/MMBtu in 2022.

Unplanned outages and demand shocks, such as increasing demand from Egypt and Europe combined with declining demand in Asia, created more opportunities for portfolio optimization in 2024, a market source said. In LNG trading, portfolio optimization entails managing supply and sales contracts along with shipping capacity to maximize returns by optimizing LNG flows.

Traders capitalized on higher LNG prices in Europe by buying cargoes at lower prices in Asia and selling them at higher prices in Europe ahead of the suspension of Russian gas flows through Ukraine on Dec. 31, following the expiration of the five-year Russia-Ukraine gas transit agreement.

The Platts-assessed East-West arbitrage (via the Cape of Good Hope) has remained below the minus $1/MMBtu level since Dec. 30, suggesting stronger margins for transporting US-sourced cargoes to Europe rather than Asia.

Throughout much of 2024, about 42 million cu m/d of Russian gas was delivered to Europe through the Sudzha route, serving Moldova, Slovakia, Austria and Italy. The suspension of these gas flows has been anticipated to increase Europe's LNG import needs, intensifying competition for spot cargoes between the Pacific and Atlantic markets.

Cargo MOC

A total of 30 entities reported 1,164 bids, 1,211 offers and 102 trades during the cargo MOC in 2024, rising from 22 entities that reported 225 bids, 608 offers and 67 trades in 2023.

On the sell side, PetroChina emerged as the most active seller, reporting 158 offers, while Glencore led the buy side with a total of 244 bids.

The cargo MOC saw a more diverse array of participants, including newcomers such as national oil companies like ADNOC Trading, trading firms such as Freepoint Commodities, and end-users like Tokyo Gas.

The fourth quarter recorded the highest activity, with 866 bids, offers and trades, which is typical for winter due to stronger demand. Traders frequently speculate on price movements, anticipating spikes in consumption due to colder weather, driving trading volumes higher.

The majority of bids, offers and trades in 2024 were index-linked, with 66.6% tied to the JKM full-month average, JKM balance month-next day, or the Dutch TTF index. This represents a slight decrease from 2023 when about 69.9% of total bids, offers, and trades were index-linked.

Price linkage to the Dutch TTF index, which represents natural gas prices in the European market, experienced a significant decline, dropping to 13.36% in 2024 from 23.22% in 2023. Market sources attributed the decrease to the index's inability to accurately reflect local market conditions and supply-demand dynamics in the Asian LNG spot market.

TTF prices experienced volatility in 2024, driven by significant hedge fund positions. In June 2024, investment funds' long positions on ICE TTF peaked at their highest levels since January 2022, with traders identifying this as a contributing factor to the volatility seen in European gas and LNG prices.

During the cargo MOC in 2024, 21 entities reported 102 trades, amounting to about 6.63 million mt of LNG, compared with 67 trades in 2023.

Shell was the most active participant, selling 41 cargoes and purchasing four. Vitol followed, selling two cargoes and buying 33, while PetroChina sold 27 cargoes and purchased seven.

November recorded the highest monthly trades at 21. The month also marked the first-ever trade for a cargo to be delivered to Thailand on a DES basis, with CNOOC selling a 3.2 TBtu cargo to BP at a flat price of $13.80/MMBtu on Nov. 15. The remaining 101 tradesin 2024 were executed on a DES basis to the JKTC region.

Derivatives MOC

A total of 7,453 bids, 7,339 offers and 1,756 trades were reported by 26 entities in 2024 in the derivatives MOC, rising from 3,106 bids, 3,256 offers and 1,107 trades reported by 18 entities in 2023.

The derivatives MOC in 2024 had several newcomers, including ADNOC Trading, Cheniere, CMT Energy Trading, Eni, Mercuria, OQ Trading and SEFE.

In the broader futures market, financial exchanges demonstrated healthy liquidity in 2024, with LNG futures trading volumes reaching 968,543 lots on the Intercontinental Exchange and 478 lots on the Tokyo Commodity Exchange. The total traded volumes cleared across both financial exchanges in 2024 equate to about 186.26 million mt, or 2,935 LNG cargoes.