Asia LNG MOC activity jumps in May as summer approaches

The Asian LNG physical and derivatives Platts Market on Close assessment process saw significant activity in May, as traders gear up for the summer season amid shifting cash differentials and market structures, according to S&P Global Commodity Insights data and industry feedback.

Cash differentials, also known as premiums or discounts, represent the prevailing prices counterparties trade relative to the benchmark values published by Platts, while market structure represents the difference in the forward price of the derivatives contract prices and spot prices.

Notably, the cash differential against the balance month contract swung between the positive and negative territories towards the end of May amid heightened supply uncertainties and emerging buying interest ahead of summers in the Asia-Pacific.

The inter-month market structure between July and August also flipped to backwardation from contango later in the month as prompt prices strengthened.

The number of bids, offers, and trades during the physical Platts MOC assessment process in May rose 6.59% on the month with 21 entities reporting 194 bids, offers and trades.

This was also a substantial increase year-on-year, supported by more stable Asian LNG spot prices. The physical MOC in May 2023 -- a period when the global LNG market was jittery amid the Russia-Ukraine war -- only saw 42 bids and offers.

The physical MOC also saw more trades in May with BP, EnBW, Glencore, Shell, RWE, Vitol, Uniper and Uniper reporting 7 trades, equivalent to about 455,000 mt of LNG physical cargoes, at both floating and fixed price basis for June and July shipments to be delivered into the JKTC region.

This compares with the 6 trades reported in April.

Other market participants of the physical Platts MOC assessment process include CNOOC, DGI, ENN, Hartree, Jera GM, Marubeni, Mercuria, PetroChina, SEFE, Shell, Tokyo Gas, Total Energies, and Six One Commodities.

Bids for cargoes to be delivered into Thailand on a DES basis were reported by Vitol, with the trading house bidding a total of seven times for H1 and H2 July deliveries.

Meanwhile, Hartree reported one offer for a cargo to be delivered on a DES basis to India for a H2 July shipment.

Majority of the bids, offers and trades were done on a floating price basis with traders using derivatives as a hedging tool with the continued stable liquidity observed in the futures market in May.

137 out of 194 (70.62%) reported bids, offers, and trades for physical cargoes were priced on a floating basis. Out of the 137, 105 bids, offers and trades were priced against the Platts JKM index, with the balance month-next day contract seeing the highest usage at 64 bids, offers, and trades.

The remaining 57 bids, offers, and trades were priced at a fixed price basis.

Outages, maintenances weigh

Asian LNG spot prices in May were largely supported by several supply issues in the region including outages at Gorgon LNG, Petronas' Bintulu complex and Brunei LNG.

Prices were also tracking firmer global gas benchmarks amid concerns over unplanned maintenance in Norway's Kollsnes and Troll gas fields and possible disruption to Russian gas supply.

The upward movement also followed strengthened buying interest, as hot weather across parts of Asia lifted power generation demand for cooling.

This was observed in the physical MOC where the number of bids reported in May increased to 65 from 39 in April.

Moreover, Asian LNG market participants issued nearly 33 buy tenders in May, up 65% on the month, where only 20 buy tenders were issued in April, according to data by Commodity Insights.

Platts JKM, the benchmark price reflecting LNG delivered to Northeast Asia, averaged at $11.23/MMBtu in May compared to $10.072/MMBtu in April.

Derivatives MOC trade volume rises

A total of 259 trades of 250,000 MMBtu each were reported, up 181.52% from April, by 14 entities, namely ADNOC Trading, BP, Dare, DVTrading, Glencore, Gunvor, Jera GM, Marubeni, RWE, PetroChina, Total Energies, Shell, Unipec, and Vitol.

Bids, offers and trades reported during the derivatives Platts MOC assessment process in May rose 24.7% on the month, and 306.12% on the year, with 16 entities reporting 1,065 bids, offers, and trades.

The balance-month next-day contract continued to see significant activity on the MOC with a total of 576 reported bids, offers and trades.

The futures market at large also saw significant activity with the LNG futures traded volumes cleared on the Intercontinental Exchange in May totaling 82,654 lots, down 5.22% on the month but up 23.58% on the year, according to exchange data. This is equivalent to around 15.895 million mt, or 250 cargoes.