Prices of spot liquefied natural gas for February delivery to Asia plunged to a four-year low, averaging $9.911 per million British thermal units, according to the latest Platts Japan/Korea Marker data for month-ahead delivery. The figure reflects the daily Platts JKM assessed between December 16 and January 15, expressed as a monthly average.
The February JKM average registered a 47.3% year over year drop, the largest on record since Platts began assessing the JKM in February 2009. The JKM reached levels not seen since February 2011, when it averaged $9.854/MMBtu.
On a month-over-month basis, the marker was down 1.5%, with the market tipping from contango into backwardation towards the end of the month as pressure from unsold cargoes and low demand began to build.
“The JKM has dropped to levels we haven’t seen since pre-Fukushima,” said Stephanie Wilson, managing editor of Asia LNG at Platts. “This is due to a relatively mild winter across much of the northern hemisphere; reduced power consumption from various industrial users in northeast Asia; and users switching fuels, as commodity prices across the board have fallen.”
With Asian buyers still holding high LNG inventories, many of the larger Japanese, South Korean and Chinese buyers were absent from the spot market for February cargoes. In contrast, the market has seen an increase in supply from projects in Russia and Australia, in addition to those cargoes on offer from projects in the Atlantic basin.
“Continued declines in the crude oil markets are also starting to impact LNG term contract prices; we may start to see this from April onwards, which could cap LNG spot prices over the summer,” Wilson added.
The majority of Asian LNG term contracts are indexed to the Japanese Customs-cleared Crude (JCC) price, which continues to fall in line with ICE Brent futures.
Although the losses on the JKM have been significant, competing fuels remain more attractive. The Platts FOB Qinhuangdao coal price averaged $3.665/MMBtu over December 16-January 15, falling 18.1% year over year and increasing 1.6% month over month. Platts FOB Singapore 180 CST fuel oil averaged $7.761/MMBtu over the same period, down 51.0% year over year and 26.6% month over month.