Trading activity in the Asian LNG market witnessed a significant increase in February, attributed to changing price dynamics and shifting market sentiment. The recent global LNG price hikes were fueled by strong demand in Europe following the cessation of Russian gas supplies on January 1, after the expiration of the Russia-Ukraine gas transit agreement. In an effort to compensate for these losses, Europe diverted marginal cargoes from Asia, importing about 6.82 million metric tons of LNG from the United States while Northeast Asia brought in only 600,000 metric tons, according to data from S&P Global Commodity Insights. Amid this environment, Europe became increasingly dependent on its dwindling gas storage, leading to concerns among industry participants.
As of March 1, European gas storage levels were reported to be down 24% year-over-year, at 38.23%, raising alarms about future competition for spot cargoes between the Pacific and Atlantic basins, especially as companies prepare to replenish inventories in the summer. Market sentiment shifted to a bearish outlook in mid-February following the European Commission’s plans for more coordinated gas storage strategies aimed at reducing system drain. This was further exacerbated by discussions of a potential US-Russia peace plan concerning Ukraine, which contributed to a sharp decline in global LNG spot prices. As spot prices fell, trading activity surged in both cargo and derivatives markets in Asia as traders worked to mitigate losses.
The Platts physical LNG Market on Close assessment process reflected this trend, showing a 50.46% increase in total bids, offers, and trades in February. Moreover, favorable arbitrage conditions began to emerge as the price dynamics shifted, prompting US-sourced cargoes to move toward Asia. Asian spot prices remained comparatively resilient, encouraging traders to capture better margins by redirecting supplies. In February, JKM futures trading volumes hit record highs as traders adjusted their positions to accommodate declining prices, showcasing robust market engagement during this period of volatile sentiment.