Asian spot LNG prices experienced a significant decline, reaching their lowest levels in seven months by the week ending March 7. This downward trend was primarily driven by negative developments in Western markets and weak demand from Northeast Asia. The JKM spot price fell sharply from a recent 14-month high of $17.123/MMBtu on February 10 to a low of $12.302/MMBtu on March 7, a price last seen in July 2024.
The potential easing of U.S. energy sanctions on Russia and the discussions around resuming Russian gas exports to Europe have added uncertainty to the market. This situation is complicated by the European Commission’s proposal for a two-year extension of the EU gas storage regulation, which may allow member states to take flexible measures for summer storage. These factors are believed to affect competition for LNG cargoes between Asia and Europe, creating a stronger Atlantic basin compared to the Pacific.
In February, demand in the Northeast region remained subdued, primarily due to moderate winter temperatures resulting in robust inventory levels. LNG imports into Northeast Asia fell by nearly 20% month-over-month to 15.56 million metric tons, with significant declines noted in South Korea and China. South Korea’s imports decreased by 27.42%, while China saw its imports dip to a five-year low.
As the Northeast Asian region transitions into the shoulder season, which typically sees lowered demand for spot cargoes, price-sensitive buyers may start showing interest in the declining JKM prices. Some traders suggest that while spot prices are becoming more attractive, they may not yet entice strong demand from markets like Korea, with potential buying targets set at around $11.50/MMBtu in China. Additionally, there is cautious optimism as lower prices are beginning to stimulate demand in Southeast and South Asia, particularly with the approaching peak heat season.
Nonetheless, geopolitical tensions pose ongoing risks, particularly with recent warnings of substantial sanctions against Russia.