PACIFIC LNG: Key market indicators for Sep 30-Oct 4

The Asia-Pacific LNG market is anticipated to see relatively quiet trading activity over Sept. 30-Oct. 4, with China's absence during the Golden Week holiday and weak demand amid the mid-shoulder season.

JKM prices increased 2.4% in the week to Sept. 27 due to expectations of a colder-than-normal winter this year and a stronger global gas market amid geopolitical tensions.

Platts, part of S&P Global Commodity Insights, assessed the November JKM at $13.335/MMBtu on Sept. 27, up 46.7 cents/MMBtu on the week. Meanwhile, Platts assessed the DES Northwest Europe for November at $12.347/MMBtu, up 86.4 cents/MMBtu over the same period.

Northeast Asia

• JKM prices rose above the $13/MMBtu mark Sept. 26, supported by geopolitical tensions in the Middle East and the Russia-Ukraine conflict. Market sources said supply in Asia is sufficient to meet demand.
• Temperatures remain the key factor for Northeast Asian buyers to plan their inventories for the upcoming months.
• Japanese participants are anticipated to replenish their stocks, as a summer heatwave has led to reduced inventory levels. Japan's LNG stocks held by major utilities dropped 12.3% on the week to a 23-week low of 1.64 million metric tons as of Sept. 22, the Ministry of Economy, Trade and Industry said Sept. 25.
• Market participants in China are expected to be away in the week ending Oct. 4 as the country celebrates Golden Week, one of its largest holidays. Factories and businesses typically shut operations during this period, leading to reduced LNG demand.

Southeast Asia

• Platts assessed the Southeast Asia Marker at $12.988/MMBtu on Sept. 27, up 40 cents/MMBtu on the week, Commodity Insights data showed.
• PetroVietnam Gas issued a buy tender that closed Sept. 27 for a 0.55-TBtu cargo to Vietnam on Oct. 25 on a DES basis. However, the tender, which sought a smaller-than-usual cargo, was heard canceled.
• In contrast, Thailand was heard facing high inventory levels, which resulted in an unawarded purchase tender.
• The market anticipates trading activity in the region to slow down, given the adequate supply and current price levels near $13/MMBtu.

India

• Platts assessed the West India Marker at $12.725/MMBtu on Sept. 27, up 40 cents/MMBtu on the week, according to Commodity Insights data.
• GAIL purchased a cargo for the end of October, while Indian Oil Corp. bought a cargo for Nov. 9-12.
• High inventories and weaker-than-expected power demand weigh on the JKM/WIM spread.
• Bangladesh was heard to have canceled its tender for Oct. 27/28 delivery cargo, while its recommendations for Oct. 10/11 and Oct. 17/18 cargoes have been forwarded to the government. Sources said that Rupantarita Prakritik Gas Co. Ltd. received offers in the $13.5-$14/MMBtu range for its two cargoes.

Derivatives

• JKM derivatives prices gained on the week, with the JKM balance-month next-day contract up 55 cents/MMBtu at $13.35/MMBtu on Sept. 27. The JKM November contract rose 40.5 cents/MMBtu to $13.255/MMBtu on Sept. 27.
• Opportunities to divert US-sourced cargoes to the Pacific basin have diminished as the Platts-assessed LNG East-West arbitrage remained in the negative territory over the past week. The LNG East-West arbitrage, via the Cape of Good Hope, was assessed at minus 63.9 cents/MMBtu on Sept. 27.
• Despite the closed East-West arbitrage window, LNG traders noted that supply of spot cargoes within the Pacific basin remains sufficient. The number of US-sourced cargoes diverting to the Far East will be key in shaping demand-supply dynamics as the market prepares for the winter season.