Pacific LNG: Key market indicators for Oct 28-Nov 1

Platts JKM, the benchmark price reflecting LNG delivered to Northeast Asia, is projected to correct to a more reasonable level, aligning with bearish fundamentals in the region, following a five-day streak of increases.

Platts, part of S&P Global Commodity Insights, assessed the December JKM price at $14.161/MMBtu on Oct. 25, indicating a weekly increase of 89 cents/MMBtu. In contrast, Platts assessed the DES Northwest Europe price for December at $13.578/MMBtu Oct. 25, up $1.159/MMBtu week on week.

Increasing output from Norway and US feedgas is expected to offer some respite for prices. However, uncertainties arising from the escalating tensions in the Middle East and the looming threat of severe winter weather may alter the market landscape. Market participants are exercising caution and adjusting their strategies in response to these prevailing conditions.

Northeast Asia

The JKM reached the highest level in eight weeks on Oct. 25 due to supply uncertainties, including extended maintenance in Norway, reduced US feedgas flows and elevated tensions in the Middle East. However, these events had limited impact on Asian market fundamentals, market sources said.

Chinese buyers were away from the spot market. Instead, the market saw more sell indications as inventory levels were said to have been excessive.

Japan was heard experiencing ample supply, with city gas utilities indicating no immediate need for additional LNG procurements for the winter. Furthermore, the anticipated resumption of operations at some nuclear power plant is expected to further reduce LNG consumption during the winter season.

Taiwan’s CPC and a South Korean importer were heard to have purchase several cargoes for December and January deliveries.

Outages at Norway’s Sleipner and Oseberg fields are expected to end Oct. 26 and Oct. 28, respectively.

Feedgas flows in the US increased Oct. 25 to 12,141 MMcf/d, the highest level since Oct. 21.

Southeast Asia

Platts assessed the Southeast Asia Marker at $13.913/MMBtu on Oct. 25, at 24.8 cents/MMBtu discount to the December JKM.

The JKM/SEAM spread slightly increased as the Southeast Asia market continues to be soft amid shoulder season.

Thailand’s PTT issued a buy tender for two December cargoes, with market sources indicating this to be a part of PTT’s regular procurement process and there has not been a noticeable increase in demand.

Currently, there are no tenders from other Southeast Asian buyers.

South Asia

Platts assessed the West India Marker at $13.713/MMBtu on Oct. 25, an increase of 92.5 cents/MMBtu week on week. The spread between JKM/WIM was stable around 45 cents/MMBtu.

Indian demand for LNG cargoes remains weak at prevailing prices as end-users prefer using competing fuels and purchasing regassified LNG domestically.

In the Indian domestic market, demand from power plants is currently thin. Instead, a significant portion is being directed toward city gas distribution, market sources said.

Bangladesh’s RPGCL issued another tender for three November cargoes in the previous week following a tender that closed Oct. 20 for two cargoes.

The tender was awarded to TotalEnergies for Nov. 3-4 and Nov. 10-11 delivery windows at $13.94/MMBtu and $13.57/MMBtu, respectively.

Buying activity in the region is expected to be quiet in the week of Oct. 28 due to the Diwali festival.

Derivatives

The JKM December derivatives saw a week-on-week rise by 72.6 cents/MMBtu to $14.04/MMBtu on Oct. 25. Platts assessed the JKM Balance month-next day derivatives at $14.3/MMBtu and the JKM January derivatives at $14.425/MMBtu Oct. 25.

The futures market remains sensitive to supply-related issues, with the extension of Norway’s maintenance activities and reduction in feedgas in some US liquefaction sites in the week of Oct. 25, market participants said.

Opportunities to divert US-sourced cargoes into the Pacific basin are still in the negative territory, with the LNG East-West arbitrage (via the Cape of Good Hope) marked at minus 68.5 cents/MMBtu on Oct. 25, Commodity Insights data showed.

While some market participants said the closed East-West arbitrage has tightened cargo availability within Northeast Asia, it has not posed problems for market participants due to thin demand for spot cargoes. East-West arbitrage opportunities will remain a key factor in determining the supply of spot cargoes in Asia as the market enters the winter season.