Platts JKM™ for November-Delivered LNG Fell 11.1% From a Month Ago

SINGAPORE, Oct. 20, 2015 /PRNewswire/ -- Prices of spot liquefied natural gas (LNG) for delivery to northeast Asia averaged $6.700 per million British thermal units (/MMBtu) for November, according to latest Platts Japan/Korea Marker (Platts JKM™) data for month-ahead delivery.

The figure reflects the daily JKM assessment published by Platts, a leading global energy, petrochemicals and metals information provider and a premier source of benchmark price references, between September 16 and October 15, expressed as a monthly average.

The marker fell 11.1% month over month, despite the fact that the market was moving into its traditionally stronger peak winter demand season. At $6.700/MMBtu, the JKM was 53.5% below prices seen for the same delivery month in 2014, marking the largest year over year change since April 2015.  

The JKM had begun the assessment period at $7.00/MMBtu, before trending down steadily to reach $6.50/MMBtu by the beginning of October, as a slew of prompt supply tenders – mostly originating from projects in the Asia Pacific Basin – exacerbated extremely limited demand among end buyers in Northeast Asia. 

Some 13 cargoes for prompt October and November delivery were offered out through various tenders during the assessment period. Meanwhile, buyers in South Korea, Taiwan and Japan continued to show no interest for cargoes. Indeed, several Japanese buyers were heard to be grappling with high inventories following lower-than-anticipated power demand during the summer and were reportedly trying to cooperate on deliveries where possible.

Similar sentiments were echoed in China, where buyer CNOOC had recently issued its first supply tender for two cargoes loading in Australia, marking a significant shift in the fundamental supply and demand balance of the LNG spot industry.

Interest continued to emerge from India and the Middle East, however, where end buyers collectively tendered or launched an expression of interest for an estimated 12 cargoes during the October/November delivery period. However, not all expressions were awarded. 

"Tender awards for prompt cargoes, particularly from buyers in Egypt and Pakistan, appeared to rejuvenate demand among portfolio suppliers and traders either looking to optimize or short cover positions," said Stephanie Wilson, managing editor of Asia LNG at Platts. "There was a late surge in buying interest for November deliveries at the end of the trading month. In response, Platts JKM values rebounded to reach $6.70/MMBtu by the end of the assessment period, with some demand from Indian importers still apparent and awards for November deliveries still pending from Pakistan." 

At an average of 29.1 cents during the trading period, the price spread between the Platts JKM and U.K. onshore National Balancing Point (NBP) gas futures has been the narrowest seen since April 2015. This is keeping the arbitrage trade between the two basins firmly closed, said Wilson.

With prices of term contract Japan Customs Cleared crude oil in Japan estimated at approximately $9-to $10 dollars per million British thermal units (MMBtu), calculated at a $14 to 14.85% indexation plus $1.00-1.25/MMBtu alpha, the possibility to secure November spot cargoes from Asia for delivery into term positions in Japan was once again viable. "This encouraged price optimization among sellers," Wilson said.  

The price of thermal coal, a possible competing fuel, decreased 23.0% year over year, while fuel oil was down 56.1% from the same month in 2014.

Note: U.K. and U.S. front month futures roll at the end of each calendar month. Platts JKM rolls on the 16th of each calendar month. 
Source: Platts data

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

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