LNG Markets Analysis

East Asian LNG prices plummet below European levels

16 February  2015 | Simon Ellis, ICIS LNG Analyst

Spot LNG prices in East Asia for March slumped below hub price levels in northwest Europe in the second week of February as the region’s utility buyers threatened to switch to cheaper crude and fuel oil imports.

The February East Asia Index shed $2.510/MMBtu to $6.771/MMBtu during its time as front-month contract from 16 January to 13 February. The March contract fell $2.475/MMBtu over the same period to $2.475/MMBtu.

The March EAX started the period at a $2.503/MMBtu premium to the Northwest European Index (NEX), but fell to a $1.352/MMBtu discount on 13 February, as European gas hub prices climbed in response to field outages in the first half of January.

As the period opened on 16 January, sellers’ hopes of keeping prices above $9.00/MMBtu quickly receded in the face of weak regional demand, as demonstrated by the failure of end buyers to participate in Australia’s Northwest Shelf tender for Q1 and Q2 deliveries.

Japan’s electricity utilities were said to be considering switching from LNG to oil-fired generation to take advantage of lower crude prices. Any ramp-up would stand in contrast to the recent trend, which saw Japan’s largest utilities reduce combined crude and fuel oil imports to less than 60% of their 2012 levels in 2014, according to the country’s Federation of Electricity Producing Companies (FEPC).

March demand was heard in Japan from Kyushu and Tohoku Electric, although both were reportedly pushing for prices below crude oil parity. The country’s largest utility TEPCO was reported to have problems at two LNG-fired power plants, which could reduce short-term demand.

Elsewhere in the region, South Korea’s KOGAS was understood to be staying out of the market to let stocks run down amid concerns about oversupply following the milder, late-winter weather. Lower crude prices put pressure on margins for Chinese state buyers.

By 26 January, the highest bid in Japan was recorded for H2 March at $7.50/MMBtu while the lowest offer for the same period was received at $7.90/MMBtu.

Further ahead, traders said some buyers were encouraged to nominate down volumes for 2015 under their long-term contract annual delivery programmes (ADP) from April. Buyers expressed the expectation that the oversupply of spot LNG would continue to depress spot prices below the levels of oil-indexed contracts, particularly those with S-curve structures to protect counterparties from oil price extremes.

On the production side, liftings to Yemen LNG were suspended from 23 to 30 January, while second-quarter maintenance was heard to be scheduled for Tangguh train 2 at Qatargas 1 train 2. However, expectations of Pacific Basin supply availability were boosted by the lower ADP nominations as Australia’s Northwest Shelf, PNG LNG and Bontang projects all opened tenders for March or April cargoes. Russia’s Sakhalin LNG also extended an eight-cargo string over 12 months with volumes understood to have been freed up by the expiry of a mid-term deal.

Against this background, buyers’ price expectations for April slid well below the prices sellers were willing to offer. On 9 February, the highest bid for H2 April was recorded at $6.00/MMBtu, while the lowest offer stood at $7.00/MMBtu.

The EAX ended the period in a shallow backwardation with H1 March prices at $6.793/MMBtu, H2 March at $6.75/MMBtu, H1 April at $6.50/MMBtu, H2 April at $6.50/MMBtu and H1 May at $6.475/MMBtu.

In Europe, imports climbed substantially above their levels the previous year as sellers with long-term contractual positions delivered flexible volumes at the relatively robust hub prices. UK and Belgian terminals received 12 Qatari vessels from 16 January to 13 February, up from four in the same period of 2014.

About ICIS

ICIS is the world's largest petrochemical market information provider and has fast-growing energy and fertilizer divisions. Our aim is to give companies in global commodities markets a competitive advantage by delivering trusted pricing data, high-value news, analysis and independent consulting, enabling our customers to make better-informed trading and planning decisions. We have more than 30 years' experience in providing pricing information, news, analysis and consulting to buyers, sellers and analysts.

With a global staff of more than 800, ICIS has employees based in Houston, Washington, New York, London, Montpellier, Dusseldorf, Karlsruhe, Milan, Mumbai, Singapore, Guangzhou, Beijing, Shanghai, Yantai, Tokyo and Perth. Some 350 of ICIS’s staff are journalists engaged in reporting market prices and news, and ICIS is fully committed to upholding the highest journalistic principles of verification, corroboration and authentication. ICIS has a compliance framework that along with its methodologies and business processes adheres to the requirements of the IOSCO PRA Principles.

ICIS is a division of Reed Business Information, part of Reed Elsevier Plc.

ICIS East Asia Index (EAX)

The ICIS EAX is a unique LNG price point, providing users with a daily tradable price for spot LNG delivered into East Asia. It is calculated using an arithmetic average of the delivered ex-ship (DES) front month and second month ahead assessments for Japan, South Korea, Taiwan and China.

LNG prices, news, analysis and real-time tracking

LNG Edge – real-time LNG tracking and analytics tool

This is the next generation in real-time, online tracking platform.

LNG Edge delivers information on LNG fleets, cargoes and prices – ALL in a single, user-friendly online platform.

It equips the whole trading team with unmatched transparency on shipping movements and availability, cargo and trade flow volumes, buy/sell opportunities, raw data and prices. It also provides user-friendly functionalities enabling faster chartering and trading decisions.  

Request a demo of ICIS LNG Edge

Daily and weekly reports

price reports

Report names:
LNG Markets Daily
Global LNG Markets

ICIS publishes the most extensive list of global LNG spot price assessments (22 DES, 12 FOB, East Asia index), historical prices, charter rates and availability, together with daily news, market alerts and industry analysis.

historical prices

Request a sample of our LNG reports

Expertise in the China LNG markets

Expertise in the China LNG markets

ICIS provides unparalleled pricing and market intelligence for China’s LNG/natural gas markets. Our reports coverage include LNG China import and domestic prices, supply-demand data, investment opportunities in China, local legislations and more. 

Enquire about our China LNG reports

Small-mid scale LNG market intelligence

Small-scale LNG market intelligence

ICIS provides a free online platform on small-mid scale LNG delivering key information on the developments in this emerging market:

• European value chain
• Marine and trucking segments
• Market news including archives
• Daily and forward price of various fuels
• Unit and price converter tool

Register now to access the portal