JKM's premium to NWE comes off highs as regional LNG competition reignites

Asian spot LNG's premium to Northwest Europe has continued to narrow, coming back down from the multi-month highs reached a week ago as competition for cargoes reignited Nov. 23, even as demand remains relatively muted in both regions heading into the peak winter demand season.

Platts assessed the DES Northwest Europe marker for January at $14.288/MMBtu Nov. 23, up 70 cents/MMBtu on the day, with the January JKM at $16.733/MMBtu Nov. 23, up 52.2 cents/MMBtu.

This put the Asian benchmark at a $2.445/MMBtu premium to its NWE counterpart on Nov. 23, down 17.8 cents/MMBtu on the day and down more than $1 from the $3.485/MMBtu premium seen on Nov. 17, which was the widest it has been since the end of January.

The premium has averaged $2.320/MMBtu so far this month, compared to the $2.095/MMBtu seen over the same period in 2022 and $4.704/MMBtu seen in 2021.

Delays at Panama Canal as well as initially colder weather forecasts in Asia had been supporting premiums for JKM prices. With European demand remaining relatively subdued and storage levels in the continent exceptionally healthy, LNG prices in Asia have outmatched any support seen in Europe.

JKM prices for January have risen by around 4% since the start of the month until Nov. 23, whereas LNG January prices in Northwest Europe have fallen nearly 1% over the same period.

Despite the price rally Nov. 23, mild temperatures and ample supply have been providing little long-term support for prices in both regions, although indicators of demand growth have lent more support to JKM prices relative to NWE.

"Spot activity, I don't think [it has picked up], but volumes are seasonally higher into Asia," an LNG source said.

Additionally, growing restrictions on transits through the Panama Canal -- the quickest route to North Asia from the US Gulf exporting region -- have helped push prices up in Asia. Some cargoes have had to reroute and take longer voyages either through the Suez Canal or round the Cape of Good Hope.

Voyages by the alternative routes increase freight costs, with the journey from Sabine Pass in the US Gulf Coast to Northeast Asia via the Panama Canal taking about 24 days, compared with 36 days via the Suez Canal and 38 days via the Cape.

Although prices across Asia and Europe rallied on Nov. 23, market source said that sentiment had not significantly improved, with supply and demand fundamentals remaining relatively balanced. Without significant drops in temperatures, prices could fall in the coming weeks, they added.

Meanwhile, despite the Asian premium to NWE, large volumes of US LNG are still heading to Europe.

US exports of LNG in November so far are at 6.28 million mt, according to data from S&P Global Commodity Insights, with nearly half of that headed to Europe.