JKM LNG jumps to five-month high following Russia-Ukraine crisis

Asia Pacific LNG prices rose to their highest levels since October as traders in the region assessed the impact of robust European LNG and gas prices following news of the Russian invasion of Ukraine.

The price surge in European gas contracts sparked a rally in LNG prices as competition for LNG cargoes between Asia and Atlantic markets persisted, according to market participants.

JKM derivatives monthly contract prices from April to October were trading at between $36/MMBtu to $40/MMBtu on Feb. 24 near to London close, data from exchanges and brokers showed.

The Platts JKM benchmark for April physical deliveries was assessed at $36.898/MMBtu on Feb. 24 at Asia market close, up $9.05/MMBtu day on day. This was also the largest single day-on-day change and highest level since Oct. 6.

Spot demand in Northeast Asia have stayed firm in recent weeks due to lower-than-normal temperatures at the tail-end of the winter season — leading to some buyers with relatively low inventory levels to restock.

"If an end-buyer needs gas, then they would have to pay for it," said a Singapore-based trader.

However, a second trader said that since the inter-basin LNG cargo arbitrage is closed and winter season is ending, LNG buyers would be reluctant to pay for cargoes at a premium to Atlantic LNG and gas prices.

Late on Feb. 24, JKM futures contracts across the curve till at least the October monthly contract flipped day-on-day from trading at a premium to a discount to the Dutch TTF European gas futures contracts.

JKM/TTF spreads for May traded in the JKM derivatives market during European hours from minus 95.5 cents/MMBtu to minus $1.000/ MMBtu at London close.

At the same time, spot LNG cargoes delivered into Europe remain cheaper than European pipelines with the Platts Northwest Europe Marker assessed at a discount of 60 cents/MMBtu to TTF prices on Feb. 24.

"JKTC [Japan, South Korea, Taiwan and China] is still vulnerable to a sudden change in weather like a cold snap. But beyond that, I can't really see buyers wanting to pay... I think buyers will hold back for a while," a third trader said.

He added that while buyers like South Korea's KOGAS and Thailand's PTT had been scouring the market this month for prompt deliveries, buying interest from end-users in Japan and China will dissipate at current price levels.

Other market sources raised the possibility of the Asia-Pacific LNG market trading at steeper discounts to the Atlantic market if European appetite for LNG starts to outstrip that of Asia -- similar to a period in late-December to January when winter temperatures in JKTC remained mild.