Asia LNG Imports Are Robust, But Record Supply Keeps Spot Prices Muted

The spot price of liquefied natural gas (LNG) is continuing to meander at low levels amid ample supply from major exporters and signs that winter demand is easing in the top-importing regions of Asia and Europe.

The spot price for LNG delivered to north Asia ended at $9.60 per million British thermal units (mmBtu) in the week to Feb. 2, up slightly from the seven-month low of $9.50 the previous week.

Spot LNG prices have broken their usual seasonal pattern of rising during the northern winter and again in summer, but declining in the shoulder periods between peak demand.

The Asian spot price reached its lowest point for 2023 in early June at $9.00 per mmBtu and only managed a small rally heading into winter, peaking at $17.90 on Oct. 20, before trending weaker to its current level.

The softness in the spot price came despite strong growth in imports in Asia, with volumes hitting a record high of 26.49 million metric tons in December, according to data compiled by commodity analysts Kpler.

This exceeded the previous high of 26.15 million tons from January 2021, and the strength seen in December was largely carried over into the start of 2024, with January imports being assessed at 26.13 million tons.

December's imports were 12.6% higher than the same month in 2022, while January's were 11.8% more than the same month a year earlier.

The rise in Asia's winter imports was largely driven by China, which regained from Japan the title of the world's biggest buyer in 2023, with December arrivals at 8.14 million tons and January's at 7.78 million, gains of 12.1% and 28.2% respectively.

India, Asia's fourth-largest LNG buyer, also saw robust year-on-year gains, with December imports of 1.86 million tons being 41% up on the same month in 2022, while January's 2.26 million was 98% higher, and was the strongest month since October 2020.

The strength in Asian LNG demand was enough to offset slightly weaker imports in Europe.

LNG imports by Europe were 11.2 million tons in January, which was down 8.2% from the same month in 2022, while December arrivals were 11.75 million, some 12% weaker than the same month a year earlier.

However, it's worth noting that December 2022 was the highest month on record for Europe's LNG imports, while January 2023 was the third-strongest.

Furthermore, the volumes for December 2023 and January 2024 are the fourth- and sixth-highest in Kpler data going back to 2009, so it would be difficult to characterise Europe's imports over the current winter as weak, even if they are down from the previous winter.

Europe's LNG imports shifted structurally higher in the wake of Russia's February 2022 invasion of Ukraine, which led to sharply lower pipeline natural gas imports from Russia and a determination on the part of Western European countries to end dependence on Moscow for energy.

Supply records
With demand in Asia strong and that in Europe relatively solid, the spot price of LNG is being kept low by robust supply, especially from top exporters the United States and Australia.

U.S. LNG exports hit a record high of 8.55 million tons in December, which helped the country claim the mantle of the world's biggest shipper of the super-chilled fuel for 2023.

U.S. shipments eased to 8.07 million tons in January, but this was still the second-highest on record and 19.7% higher than in the same month in 2023.

Australia's exports also hit a record high in December, being assessed at 7.22 million tons by Kpler, eclipsing the previous high of 7.18 million from March last year.

January shipments were 7.08 million tons, up 2.3% from the same month last year.

Qatar, the world's third-biggest LNG exporter, saw record shipments in January of 7.58 million tons, beating the previous high of 7.47 million from January 2018.

With LNG demand likely to ease in coming months as the northern winter ends, it's likely that spot prices will struggle to rally, especially if export volumes hold up from the major producers.

(Reuters - The opinions expressed here are those of the author, a columnist for Reuters. Editing by Sonali Paul)