Lower LNG prices trigger surge in Asian spot market purchases

China Resources Gas

21/03/2024 03:31

* 
      Spot Asia LNG prices have eased by a quarter since start
of year
    

        * 
      Increasing spot purchases to lift Asia LNG demand -
analyst 
    

        * 
      China, India could see annual imports rise by 10% -
analysts 
    

  
    By Emily Chow
       SINGAPORE, March 21 (Reuters) - Price-sensitive
liquefied natural gas buyers from China, India and parts of
Southeast Asia are snapping up more spot shipments of the fuel
to power industries and generate electricity after prices have
fallen to the lowest level in nearly three years.
    The price-led demand revival could push LNG imports by the
world's top buyer China beyond its record volume of 78.8 million
metric tons in 2021 and also raise India's imports by about 10%
this year, analysts said, tightening global supplies and
ultimately lifting prices.  
    Spot LNG imports by Asian buyers increased by nearly a third
in the first quarter of the year to 161 cargoes, according to
data from S&P Global Commodity Insights, when spot Asian prices
 LNG-AS  averaged $9.82 per million British thermal units
(mmBtu). This is up from 125 in the same period of 2023, when
prices averaged $18.75/mmBtu. 
        Thailand's Gulf Energy Development  GULF.BK  said it
received its first-ever LNG cargo in February, while industry
sources said Hong Kong-listed China Resources Gas  1193.HK  will
receive its first shipment in March. PetroVietnam Gas  GAS.HM 
had also sought two spot shipments to be delivered from April,
nine months after taking Vietnam's first LNG cargo. 
        "We've seen some buy tenders coming in more frequently
given lower Asian LNG prices, especially from price-sensitive
buyers like India, Vietnam and China," said Ryhana Rasidi, LNG
analyst at data analytics firm Kpler. "For this year, we believe
that the increasing spot demand will contribute to raising
overall Asian LNG demand."
    China Resources Gas and PetroVietnam Gas did not respond to
requests for comment.
    Global gas markets have more supply after
weaker-than-expected demand due to a mild winter and high
stockpiles in the U.S., Europe and Japan. Asian LNG prices were
at $8.30/mmBtu earlier this month, the lowest levels since April
2021, before seeing a slight boost to $8.60/mmBtu due to the
spot buying. 
    That is still far below the record $70/mmBtu hit in August
2022 following Russia's invasion of Ukraine that led some
price-sensitive Asian buyers to switch to other fuels like oil
and liquefied petroleum gas.
        
  
        
    
    COMPETITIVE PRICES
        Pallavi Jain Govil, a senior official at India's energy
ministry, said Asian spot LNG prices of $11/mmBtu and below were
competitive.
    "We are committed to doubling gas in our power mix in the
next six years so we plan to import more LNG," she told Reuters
this week on the sidelines of the CERAweek energy conference in
Houston. 
    India's LNG imports could rise by about 2 million to 3
million tons this year to 24 million to 25 million tons,
analysts said, with the increase by Asia's fourth-biggest buyer
driven mostly by spot purchases.  
    LNG was traditionally sold through long-term contracts but
the spot market has become more active, accounting for about 35%
of global trade by 2022, up from 5% in 2000, according to the
latest data from trade association International Group of
Liquefied Natural Gas Importers.
    For some importers, the Asian spot price for April delivery
had been lower than their oil-linked long-term contract prices,
which range from $10-12/mmBtu, a Rystad Energy report said.     
    In China, ICIS forecasts Chinese spot LNG purchases at 17
million tons in 2024, a 1 million to 2 million ton increase from
last year when Asian spot prices averaged at $17.68/mmBtu.
    Increased LNG imports in China and India are not expected to
significantly dent coal demand, as overall power demand
continues to grow and both countries continue to prioritise
domestically produced fuel, including coal.    
    "In China, demand will mainly come from industrial and
commercial users," said Alex Siow, lead Asia gas and LNG analyst
at pricing agency ICIS. "If those players are unrestrained by
price, they will buy gas."

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Asia LNG price and demand    https://tmsnrt.rs/3PmMhmu
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 (Reporting by Emily Chow in Singapore; Additional reporting by
Curtis Williams in Houston; Editing by Jamie Freed)
 ((emily.chow@thomsonreuters.com; Reuters Messaging:
emily.chow.thomsonreuters.com@reuters.net))