The LNG carrier SCF La Perouse sails along Nakhodka Bay near the port city of Nakhodka, Russia June 13, 2022. REUTERS/Tatiana Meel

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LAUNCESTON, Australia, Aug 1 (Reuters) – The price of spot liquefied natural gas (LNG) in Asia soared last week to its highest level this year, but falling demand in the biggest-consuming region shows that the market is still largely influenced by the Russian gas crisis in Europe.

The weekly spot price was valued at $42.50 per million British thermal units (mmBtu) on July 29, surpassing the previous 2022 high of $40.50, reached on March 4 following the invasion from neighboring Ukraine on February 24.

The price is still below the record high of $48.30 per mmBtu for the week ending December 23, but it is also 160% higher than it was the same week in July last year, and 1400% above the level at the end of July 2020. .

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The surge in prices in Asia is not due to strong demand from the region, in fact the opposite is happening with imports falling since the beginning of the year.

China has been particularly weak on LNG demand, with July imports forecast at 5.12 million tonnes by commodity analysts Kpler, down 14.1% from the same month in 2021. .

For the first seven months of the year, Kpler estimates Chinese LNG imports at 36.53 million tonnes, down 19.6%, or 8.89 million tonnes compared to the same period in 2021.

China overtook Japan last year as the world’s top importer of super chilled fuel, but is on track to return the crown this year.

Japan also saw a decline in LNG imports, but not to the same extent as China.

Imports from Japan in July are forecast at 6.72 million tonnes, compared to 6.46 million for the same month in 2021, but for the first seven months of the year imports fell by 2.2% to 44 .5 million tons.

South Korea, Asia’s third-largest LNG buyer, is also seeing lower LNG demand, with imports down 4.8% year-to-date, with July arrivals pegged at 3.34 million, a decrease of 20% compared to the same month last year.

India, the region’s fourth-largest LNG importer, imported 1.8 million tonnes in July, down 5.8% from the same month last year, while imports in the first seven months fell by 11.8% to 12.44 million.

LNG imports by Asia, Europe

EUROPE’S RISE OUTWEARS ASIA’S LOSS

Overall, Asian LNG imports for the first seven months are estimated by Kpler at 154.46 million tonnes, down 6.1% from the same period last year.

High oil-related spot and long-term contract prices are expected to be largely responsible for lower LNG demand in Asia.

China, in particular, has increased domestic coal production and consumption to reduce its reliance on natural gas, while countries like Japan and South Korea are trying to boost the use of alternatives in coal production. electricity, such as nuclear and coal.

But even as LNG demand in Asia moderates, that in Europe continues to rise as buyers seek LNG as an alternative to now uncertain supplies from Russian pipelines.

European LNG imports amounted to 71.83 million tonnes in the first seven months of the year, up 56.1% compared to the same period in 2021, according to Kpler.

In terms of volume, the 25.81 million tonnes of additional demand from Europe compensates for the loss of 10.08 million tonnes from Asia, which clearly shows why LNG prices remain at extremely high levels.

Of course, there’s more to the picture, with other regions, like South America, also seeing lower demand.

Global exports also rose by just over 10 million tonnes to 234.83 million in the first seven months as LNG producers try to maximize production and minimize outages.

But the bigger picture is still one of an extremely tight market facing considerable risk as the Nordic winter approaches, with Russian pipeline supply to Europe a major question mark.

So far, Russian LNG exports have been largely unaffected by the war in Ukraine, although there have been some changes among buyers, with China taking more and Europe gradually reducing its cargoes. Russia calls its actions in Ukraine a “special operation”.

But Moscow is insisting on changing payment methods and is also considering taking full control of Sakhalin Energy, which operates the Sakhalin-2 LNG facility, which in turn supplies around 10% of Japan’s LNG imports. Read more

While Russian LNG should continue to flow and find buyers, it is also likely that the current market tightening will continue, possibly forcing further drops in demand in some Asian countries.

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By Clyde Russel; Editing by Christopher Cushing

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