Asian LNG physical MOC activity falls 53% in August; derivatives hit YTD high

The total number of bids, offers and trades reported during the physical Platts Market on Close assessment process in August declined as the market entered the post-summer shoulder period, with market uncertainty dampening buying interest, according to S&P Global Commodity Insights data and market feedback.

The physical MOC in August saw 14 entities report 132 bids, offers and trades, down 53.36% on the month.

Five entities, namely BP, Glencore, PetroChina, Shell and Vitol, reported four trades for September shipments to be delivered to the Japan-Korea-Taiwan-China region.

This is equivalent to approximately 260,000 metric tons of LNG cargoes.

Other market participants in the physical MOC included CNOOC, DGI, EnBW, ENN, Hartree, Marubeni, SEFE, Trafigura and Uniper.

Apart from DES JKTC bids, offers and trades, SEFE reported five bids for a second-half October cargo to be delivered to India, while Glencore reported three bids for a H2 September cargo and Vitol reported five bids for a H1 October cargo to be delivered to Thailand.

66.7% of all bids, offers and trades were priced against the Platts JKM -- the benchmark price reflecting LNG delivered to Northeast Asia -- as traders sought to hedge amid continued stable liquidity seen in the futures market.

The average cash differentials of all bids and offers reported in August were marked at a 19.8 cents/MMBtu discount to the October JKM contract and a 11.7 cents/MMBtu discount against the balance-month next-day contract, according to Commodity Insights data.

In contrast, the average cash differentials of all bids and offers reported in July were marked at an 8.2 cents/MMBtu discount to the September JKM contract and an 8.9 cents/MMBtu discount against the balance-month next-day contract, the data showed.

Asian spot LNG prices jump on supply, geopolitical concerns

LNG traders attributed the quieter activity during the MOC to market uncertainty in August, amid supply issues and geopolitical risks.

Train 2 at the INPEX-operated Ichthys LNG project in Australia was shut Aug. 20, resulting in "a couple of cargo" impacts from the outage, an INPEX spokesperson previously told Commodity Insights.

A temporary outage at the Freeport LNG facility Aug. 28 also spooked the market, leading to a spike in European gas prices. Utilization at the Freeport LNG terminal picked up Aug. 30, according to a company spokesperson, as the operator resumed normal operations.

Moreover, sour sentiment amid escalating tensions in the Middle East and the Russia-Ukraine conflict continues to keep Asian spot LNG prices elevated.

"Fortunately, we have not seen the Middle East and Russia-Ukraine issues result in any volume impact," a Singapore-based trader said.

Demand for spot cargoes in August was relatively muted as the market entered the post-summer shoulder period, according to market sources.

Buying activity in the JKTC region was primarily driven by Japanese companies replenishing stocks following the shutdown of the No. 2 Reihoku coal-fired unit in Japan and the outage at Ichthys, as well as Indian importers who awarded some buy tenders toward the end of the month.

Meanwhile, high prices stifled buying interest among other market participants in the region.

"Chinese buyers are not out in the market; demand [for spot LNG cargoes] remains weak as prices are too high," a trader working at a Chinese company said.

The Platts JKM was higher on the month, with the average JKM price in August up 12.76% at $13.709/MMBtu.

The Platts JKM also traded within a larger price range in August compared with July. Platts JKM prices ranged between high $12/MMBtu and low $14/MMBtu in August, compared with the narrower range of mid $11/MMBtu to high $12/MMBtu in July.

Derivatives MOC activity in August reaches YTD high

Meanwhile, bids, offers and trades reported during the derivatives MOC in August remained stable, reaching a year-to-date high of 1,705.

A similar trend was observed for the JKM balance-month next-day, which reached a year-to-date high of 626 bids, offers and trades in August.

A total of 160 trades for the JKM October, November and balance-month next-day derivatives of 250,000 MMBtu each were reported by 12 entities, namely ADNOC Trading, BP, Dare, Freepoint Commodities, Glencore, Gunvor, Jera GM, Marubeni, PetroChina, Shell, Unipec and Vitol.

The futures market at large was also steady, with LNG futures traded volumes cleared on financial exchanges in August totaling 66,952 lots, down 2.31% on the month but up 1.79% on the year, according to exchange data.

This is equivalent to approximately 12.88 million metric tons, or 203 cargoes.