Traders Brace for Second Asian Winter Price Frenzy

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Already-high Asian LNG spot prices are widely expected to strengthen as winter approaches, with some traders wondering whether new records could be smashed if weather is again exceptionally cold. World Gas Intelligence spot price assessments for Northeast Asia climbed in July from $12.50 per million Btu at the start of the month to $15.60/MMBtu by the end as heat waves across the region bumped up cooling demand. Prices are now assessed around $17.15/MMBtu. Demand has also been strong in South Asia, while additional support came from high European prices. Supply meanwhile tightened after production was hit at Australia's 16.9 million ton per year North West Shelf LNG when corrosion was discovered at the Karratha gas plant during routine maintenance. The stars are now aligned for Asian spot prices to remain above multiyear averages as winter approaches and additional supply looks limited. Traders are divided on the possibility that prices will breach levels seen at the start of 2021. Some spot cargoes reportedly changed hands for $30-$40/MMBtu, boosting regional price spreads to record levels (WGI Jan.13'21). "It will need another perfect storm -- maybe literally like hurricanes hitting US liquefaction assets, an incident in the Panama Canal, liquefaction problems in the Pacific or a supercold winter globally. But consumption, in general, should pick up post-Covid. So yes, there is possibility of something,” one trader says. “There is definitely a risk," adds a second trader, noting extremely low inventories in Europe. "The pulling of volume could create tension between the regions to reach highs we have not seen. We are more concerned with spreads." But another source believes that although prices will be high, they won't match last winter's. While prices on the Dutch TTF hub will be the main driver, "Asian demand won't be as strong because everyone has built reserves." Asian spot prices are now at levels unseen at this time of year since 2013. If they follow the same trajectory, they could reach $19.70/MMBtu this winter. China Biggest First-Half Buyer Northeast Asian imports totaled 17.2 million tons in June, 13% higher year on year as economies recovered from the pandemic, but just 0.5% higher than in May. First-half imports by Japan, China, South Korea and Taiwan were 14% higher at 111 million tons, again because of the easing of Covid-19 restrictions and warmer weather. China again topped Japan as the largest buyer in June, taking 6.71 million tons, a 3% decrease from May, but 16% higher year on year. Japan imported 5.7 million tons, 15% more month on month and an 8% year-on-year increase. China was also the biggest importer in the first half, bringing in 39.7 million tons to Japan's 38.9 million tons. The half-year total was 27% higher in China and 7% higher in Japan. South Korean demand grew in June by 21% year on year and in Taiwan by 1.7%. India’s imports inched up to 2.1 million tons in March from 1.9 million tons in February, and were stable year on year. Demand recovery was slow after a very strict lockdown. Traders seem confident that demand will pick up over the summer as cooling demand increases and restrictions ease. In Southeast Asia, Singapore’s imports tanked in June by 33% month on month and 17% year on year to 284,000 tons, likely because of Covid-19 restrictions. Thailand’s imports rose by 19% year on year to 592,000 tons, but were 16% lower month on month. Malaysia imported 121,000 tons in May, 42% less year on year and 32% less than in April. Australia is the country's sole supplier. Yousra Samaha, Dubai, and Marc Roussot, Singapore

Gas Demand, Gas Inventories, Gas Supply, Gas Prices, LNG Prices
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