Electric Power, LNG, Natural Gas

October 21, 2024

PACIFIC LNG: Key market indicators for Oct 21-25

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Platts JKM -- the benchmark price reflecting LNG delivered to Northeast Asia -- is expected to be rangebound in the week to Oct. 25, with market fundamentals unchanged and winter procurement largely completed for 2024. Nonetheless, temperature fluctuations in the coming month will play a pivotal role in influencing LNG demand and price movements.

Platts, part of S&P Global Commodity Insights, assessed the December JKM price at $13.271/MMBtu on Oct. 18, down 40.1 cents/MMBtu on the week, in comparison with December JKM. In contrast, Platts assessed the DES Northwest Europe price for December at $12.419/MMBtu Oct. 18.

Supply in the Pacific region is expected to remain ample, as traders are potentially sending cargoes to the region due to ship availability.

Northeast Asia

Market activity in the region has been notably subdued over the past week due to lackluster demand and ample supply, which have also led to a downward pressure on prices.

There were limited trade discussions in the week ended Oct. 18, with market sources reporting that winter procurement activities had been completed for the year.

In China, spot LNG that is currently above $13/MMBtu remains uncompetitive compared with domestic gas. Market sources also reported an uptick in the domestic gas supply, further reinforcing the appeal of local alternatives.

Meanwhile, Japanese entities were seen in the market largely for optimization. The spark spread is seen stronger, with market sources attributing it to the tight power supply capacity and lower output from solar power plants.

South Korea continues to see high inventories, with no immediate plans for spot procurement.

Southeast Asia

Platts assessed the Southeast Asia Marker at $13.063/MMBtu on Oct. 18, at 20.8 cents/MMBtu discount to the December JKM.

Three buy tenders from Thailand’s PTT, Hin Kong Power and B. Grimm were closed last week, with price levels heard around 20 cents/MMBtu discount to JKM.

The market is still awaiting the result of Gulf Energy's LNG contract for seven cargoes per year for 2025-26. Competitive offers were heard around JKM minus 20-30 cents/MMBtu.

Electricity Generating Authority of Thailand also issued a request for expression of interest Oct. 16 for term and spot cargoes.

The ongoing rainy season in Southeast Asia, with forecasts indicating continued wet conditions through November, is likely to lower electricity consumption. Increased hydropower generation would potentially offset demand from other sources as well.

India

Platts assessed the West India Marker at $12.788/MMBtu on Oct. 18, down 31.2 cents/MMBtu on the week.

The spread between JKM/WIM widened to 48.3 cents/MMBtu for December on Oct. 18 amid winter pricing expectations in Northeast Asia.

The Indian domestic market witnessed strong demand in the week to Oct. 18 from city gas distribution companies as domestic gas allocation for such companies was cut.

BPCL purchased a cargo for Nov. 29-Dec. 5 on Oct 18 at $12.9-$13/MMBtu.

Derivatives

The JKM December derivatives saw a decline of 36.6 cents/MMBtu to $13.314/MMBtu on Oct. 18. Platts assessed the JKM Balance month-next day derivatives at $13.3/MMBtu and the JKM January derivatives at $13.63/MMBtu Oct. 18.

Opportunities to divert US-sourced cargoes into the Pacific Basin are still in the negative territory although there was a 21.4 cents/MMBtu rise on the week. The LNG East-West arbitrage (via the Cape of Good Hope) was at minus 58.8 cents/MMBtu on Oct. 18, Commodity Insights data showed.

Market participants noted that high inventories in Europe and available shipping options are leading to cargoes arriving in Asia. As a result, supply in Asia remains ample, despite the arbitrage opportunities being closed for the past few weeks.


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