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January JKM averages $10.06/MMBtu, down 46.9% on year on weak demand

Highlights

The Platts JKM for January-delivery cargoes averaged $10.06/MMBtu over the November 17-December 15 assessment period, down 46.9% year on year, as increasing spot supply weighed down sentiment resulting in the largest year-on-year drop seen in prices since Platts began assessing the JKM in 2009.

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The Platts average JKM for January was also 19.4% lower month on month, despite January being in the middle of the traditional peak winter demand season in Northeast Asia.

January JKM prices started at $10.65/MMBtu on November 17, before falling to $9.90/MMBtu on December 1, as several traders offered already-loaded cargoes -- the result of floating storage plays from the summer -- leading to a supply overhang of winter cargoes.

Australia's North West Shelf facility and Russia's Sakhalin facility provided some support issuing two tenders in late November offering December-February delivery cargoes.


South Korea's state-owned Kogas, the world's largest LNG importer, was heard to have bought four cargoes from the NWS tender, and two from Sakhalin.

Both tenders closed in the week ended November 28.

The NWS cargoes were likely sold to Kogas at around $10/MMBtu DES (delivered ex-ship), although it was unclear whether Kogas participated directly in the tender or purchased the cargoes from third parties.

Kogas' unexpected entry resulted in several Asian traders and one end-user coming into the market as well, seeking DES cargoes for second-half January delivery to Japan.

Also, fears of the lingering supply overhang were starting to ease as there were fewer distressed sellers left with floating cargoes.

All this caused prices to rise slightly since December 1 to $10/MMBtu on Monday -- the last trading day for the January JKM.

Inventories at Northeast Asian buyers were still high though, a result of weak demand due to average temperatures at the start of winter and weak downstream power usage, said trade sources.

Some buyers who had space for additional cargoes said they would wait for the market to fall further before locking in deals.

Others were hesitant to procure additional cargoes until their downstream demand picked up, as they didn't want to risk facing tank-top constraints if demand turned out to be lower than expected.

The rapidly falling crude prices also weakened LNG demand.

With ICE Brent futures for January delivery hovering around $60s/barrel, LNG contracts linked to oil, as well as oil itself, was becoming more competitive.

Some buyers were looking at opportunities to buy cargoes from the spot market at levels below oil-indexed long-term contract prices in the first quarter of 2015.

On the supply side, market participants expected additional supplies to be made available in the near future from Australia's NWS, while others expected Indonesia, the Middle East, and Papua New Guinea to add spare volumes to the market.

The UK National Balancing Point front-month futures averaged at $8.802/MMBtu over the past month, up 1.9% from the previous month but 24.2% lower year on year, as fears of winter pipeline shortfalls eased.

The spread between the JKM and the NBP narrowed to $1.204/MMBtu in the assessment period, down 67.1% month on month.

Meanwhile, front-month NYMEX Henry Hub gas futures averaged $4.019/MMBtu over the assessment period, up 2.1% month on month and 1.8% year on year.

The Platts FOB Qinhuangdao coal price averaged $3.608/MMBtu over November 17-December 15, falling 17.7% year on year, but gaining 2.4% month on month, while Platts FOB Singapore 180 CST fuel oil averaged $10.573/MMBtu over the period, down 13.6% month on month and 32.9% year on year.

--Max Gostelow, max.gostelow@platts.com
--Edited by Haripriya Banerjee, haripriya.banerjee@platts.com