Asian LNG MOC for May JKM sees lower activity on shoulder season, cautious sentiment

Activity in the Platts Market on Close assessment process for Asian physical LNG and derivatives declined during the May JKM pricing period, coinciding with the shoulder season, S&P Global Commodity Insights data shows.

The total number of bids, offers and trades during the May pricing period in the cargo MOC reached 292, representing a month-over-month decrease of 24.7% but a year-over-year increase of 108.6%.

This included 114 bids, 174 offers and four trades for deliveries in late April, May and June, involving 17 entities. The majority of these bids, offers and trades were reported for delivery into the Japan-Korea-Taiwan-China (JKTC) region, with 33 reported for delivery into Thailand and India.

For DES Thailand, Marubeni and PetroChina submitted eight bids for May deliveries. Meanwhile, the DES India basis saw BP make six offers and Mercuria two offers for May deliveries, while PetroChina made 18 bids for May deliveries.

Out of the 292 bids, offers, and trades for LNG cargoes, 242 (82.9%) were priced on a floating basis. Of these, 213 were linked to the Platts JKM index and six were linked to the Platts WIM, while the remaining 50 were priced on a fixed basis.

The average cash differential of JKM-linked bids and offers for May shipments into the JKTC region were priced at a slight premium of 1.9 cents/MMBtu to the balance-month next-day and a discount of minus 6.3 cents/MMBtu to the June JKM contract.

Prices under bearish pressure

Asian LNG prices have fallen following the imposition of tariffs by the US, which exerted bearish pressure on the LNG market. Additionally, the shoulder season typically sees lower demand for power generation, further dampening spot cargo demand from end-users.

The Platts JKM for May, which serves as the benchmark price for cargoes delivered to the Northeast Asian region, fell by 8.7% month-over-month, from $13.644/MMBtu to $12.462/MMBtu.

Market participants reported subdued buying activity as end-buyers remained cautious amid rapid price fluctuations. One LNG trader remarked, "China is not actively buying even when JKM is at the $11 level; they are now targeting a $10 price."

The number of buy and sell tenders closed by market participants also decreased during this period, with approximately 24 tenders closed compared to 34 in the April JKM pricing period.

In a similar trend, the number of trades reported in the cargo MOC assessment process fell to four during the May pricing period, down from 13 in April. These trades, linked to the JKM index, were reported for end-April and H1 May deliveries to the JKTC region by BP, Glencore, PetroChina, Shell, Marubeni, Vitol and Uniper.

While overall buying interest for spot cargoes was muted from Chinese and Japanese importers, some South Korean end-users engaged in purchasing activities for May and June cargoes to take advantage of the price decline.

Derivatives

During the May pricing period, the derivatives Platts MOC assessment process recorded 21 entities reporting 1,571 bids, offers and trades, down 3.2% on the previous month but a year-over-year increase of 53.3%.

A total of 75 trades for the June and Balmo-ND contracts of 250,000 MMBtu each were recorded by 14 entities, including ADNOC Trading, BP, Chevron, Dare, DGI, Glencore, Gunvor, Marubeni, PetroChina, SEFE, Shell, Six One Commodities, Total Energies, and Trafigura.

Notably, activity for the JKM/WIM spread contract was observed on the derivatives MOC, with BP reporting one bid and one offer for the spread contract on March 20. On the same day, BP offered a mid-May delivery cargo to India linked to the WIM full month May average contract.

From March 17 to April 15, financial exchanges recorded robust liquidity, with LNG futures trading volumes cleared on financial exchanges totaling 102,489 lots, equivalent to approximately 19.71 million metric tons, or 311 cargoes.