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JKM Weekly: Platts JKM edges up on colder weather, limited supply

The Platts JKM for February delivery LNG deliveries rose 12.5 cents/MMBtuover the week to end at $11.20/MMBtu Friday, as colder weather supportedexpectations of further Northeast Asian demand and limited supply options.

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Northeast Asia started the week with deals heard concluded late lastFriday, heard likely in the low-$11s/MMBtu. Thin liquidity due to the year-endholiday season largely crimped trading activity through the week, but marketsentiment remained slightly bullish on the back of colder regional weather tospur heating requirements.

Underpinning demand expectations, average December temperature acrossJapan, South Korea and China remained below seasonal average and below averagetemperatures recorded in December 2016, according to S&P Global PlattsAnalytics. Earlier in the week, average temperatures recorded in China wereabove average and expected to remain that way heading into the New Year.

South Korea and Japan experienced colder weather earlier this week, withJapan recording a cold snap and heavy snow fall in northern and central Japan.

The Japan Meteorological Agency forecasts a 40%-50% chance of colderweather through January, primarily in central and southwestern Japan. TheKorea Meteorological Administration expects the weather to be colder for twoweeks in January, with one week of higher temperatures and one week of averagetemperatures.

On the supply side, attention was on Indonesia's two large sell tenders,the operational status of Wheatstone LNG, Gorgon LNG, and Cove Point LNGfacilities.

Indonesia last week launched a 11-cargo tender and a 13-cargo expressionof interest exercise, offering volumes from February through to December, withmarket participants eyeing for winter volumes.

Two vessels have declared Ashburton North as their destination, whereAustralia's Wheatstone LNG facility is situated. Market participants have beenwatching for the facility's first post-maintenance cargo since late November.

The Asia Vision is declared for arrival on January 3 and the Bishu Maruis declared for arrival on January 8, according to Platts trade flow softwarecFlow.

Similarly, loadings from Australia's Gorgon facility are keenly watchedto chart the state of the facility's third production train, which is heard tobe undergoing maintenance in December. The resumption of production from bothfacilities is expected to alleviate supply tightness especially on the promptshould spot volumes be made available.

The Cove Point facility, the next US export facility due to start up, isalso closely being watched. The facility took delivery of its first cargo,likely for cool-down operations, earlier this month.

However, market participants are watching for the start of export volumesand the rate of ramp-up to impact global supply in the coming winter months.

Arbitrage differential between Northeast Asia and the UK's NationalBalancing Point continued to open up across the week, exceeding $3.70/MMBtu,and spurred Asian market participants to look for potential reload offers toemerge.

However, limited shipping availability could crimp trade, drawingparallels to a similar situation late last year.

Further forward, expectations of the seasonal backwardation intospringtime firmed up for February, with the intramonth backwardationstructure widening from 5 cents at the start of the week to 10 cents at theend of the week.

The backwardation into March ended the week at $1.20/MMBtu but marketparticipants remained split on whether stronger February prices would steepenthat backwardation structure or would stronger restocking demand support amore gradual decline.

--Edwin Loh, edwin.loh@spglobal.com

--Edited by Irene Tang, irene.tang@spglobal.com