Singapore — Asia's natural gas demand has picked up since the COVID-19 lockdowns in the first and second quarters of 2020, but the recovery is haphazard and LNG markets have struggled.
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Countries that emerged early, like China, are now seeing gas demand saturate, while others like India are still seeing a rebound in LNG imports into June. But gas demand growth remains fragile through summer due to secondary outbreaks and economic damage.
**The S&P Global Platts JKM for August was assessed at $2.150/MMBtu on June 30, slightly above record low prices and down from over $5/MMBtu at the start of the year.
**Oil-linked prices for contracted LNG has fallen sharply end-March, converging with spot JKM prices, in line with crude prices falling to $20s/b. But the rebound in oil prices in May has seen spot LNG and oil-linked LNG prices diverge again.
**S&P Global Platts Analytics expects JKM and TTF to find support from a bullish rally in coming months on the back of emerging fundamentals including production cuts in the US and Asia.
**China imported 5.2 million mt of LNG in May, up 18% year on year and 2.7% higher from April, customs data showed. This was the strongest year-on-year growth since August 2019, and higher than the 7.6% growth recorded in May 2019. But June LNG arrivals are slowing as China's post-COVID-19 recovery peaks.
**India's April LNG imports were at its lowest in over three years. But in May it rebounded 22.4% month on month to 2.38 Bcm, official data showed, reflecting a gradual relaxation of lockdown measures. Its LNG imports are set to continue rising sharply in June as the recovery takes hold.
**Kogas' LNG sales in May dropped 24.1% from a year earlier to just 1.632 million mt, its third consecutive monthly decline and the biggest year-on-year decline in more than a decade since Platts started compiling such data in January 2010. May demand was down 27.9% from 2.263 million mt in April.
**South Korea's gas purchases by power generators in May declined 36% year on year, while sales to retail gas companies for households and businesses declined 13.3%. Low downstream sales means that inventories are stressed and June LNG arrivals into South Korea are on track to be even lower than May, declining to multi-month lows.
**Japan imported 4.6 million mt of LNG in May, down 18% year on year and 12% lesser than April, its lowest since mid-2009, official data showed. Japanese energy demand typically slumps in May due to the Golden Week holidays, but this year was far worse. June LNG arrivals into Japan are slightly better, but not a huge improvement as downstream demand remains challenged.
**Thailand imported 445,778 mt of LNG in May, down 35.7% from last year, and 29.1% lower than April, customs data showed. Platts Analytics said Thailand's total gas supply in April fell to its lowest since 2014, with declines in domestic production, pipeline and LNG imports reflecting a weaker economy and lower consumption. June LNG arrivals remain strong.
INFRASTRUCTURE (Supply and macroeconomic fundamentals)
**Malaysia, the world's fifth largest LNG exporter, is indicating supply cuts of about 20% to 25% from its terminals from peak January levels, in line with Petronas' strategy of optimizing supply to help the market rebalance. The supply cuts are likely to trend well into June and July.
**More than 40 US LNG cargoes scheduled for August loading were canceled by customers, taking the total number of US cargo cancellations to about 130 since April, according to Platts calculations. Several of these were cancelled by Asian offtakers, indicating oversupply challenges for summer 2020.
**Australia's Department of Industry, Innovation and Science said downward quantity tolerance triggered by buyers, delayed shipments and changes to maintenance schedules could reduce Australian LNG exports in the second half of 2020 marginally.
**Platts Analytics said liquefaction utilization in the US is expected to fall below 50% in the months ahead, compared with utilization out of Australia and Qatar, which are expected to remain above 80%.
**S&P Global Ratings expects a steeper decline in Asia Pacific's economic growth in 2020, forecasting a 1.3% contraction before growth of 6.9% in 2021, compared with its previous projection of 0.9% and 6.7%, respectively.
**GDP forecast for Asia Pacific for 2020 and 2021 is about $2.7 trillion lower than before the pandemic began, Ratings said. It expects permanent 2%-3% shrinkage of most economies by the end of 2023 compared with pre-COVID-19 trends.
**Early exiters from COVID-19 include China and South Korea, middle exiters include Japan, and late exiters are India and Indonesia. Economic conditions in Asia Pacific may not rebound until the second half of 2021 and the region's activity level may only reach close to pre-COVID-19 trend by 2023, Ratings said.