Page 4 - GLNG Week 39 2021

GLNG COMMENTARY GLNG

LNG prices hit new record highs

LNG spot prices in Asia rose to a new record high on September 30 as high demand

and low supply trends persist

PERFORMANCE ASIAN LNG spot prices have hit new record The latest rally has been attributed in large
highs once again, as demand continues to rise part to conditions in Europe, where low gas
WHAT: while supply remains constrained. inventories have combined with rebounding
LNG spot prices in Asia The price trends illustrate the recent vola- demand and constrained LNG imports. How-
have hit new record tility of the LNG trade, with demand taking a ever, domestic factors in Asia, such as high
highs. hit last year amid the first wave of the coronavi- demand from utilities in China, are also con-
rus (COVID-19) pandemic and then strongly tributing to the situation.
WHY: rebounding last winter. On a barrel of oil equivalent (boe) basis, the
Demand for the super- While winter weather across much of Asia is cost of LNG has now come close to $190 – more
chilled fuel continues currently expected to be mild over the coming than twice the level the Brent crude benchmark
to rise, while supply months, there are now concerns that the com- is currently trading at.
has been somewhat ing winter could mark a repeat of 2020-21, espe- The fact that the price of LNG has risen even
constrained. cially if temperatures end up being lower than as the weather remains relatively mild for now
expected, pushing up heating demand. And has prompted concern over how supply and
WHAT NEXT: indeed, some countries, including major LNG demand trends will play out once winter arrives
Colder-than-expected buyers China and South Korea, are expected to in the Northern Hemisphere. Citigroup has
winter weather could experience lower-than-average temperatures. suggested that cold winter weather could cause
exacerbate the situation Asian LNG prices to rise threefold compared
over the coming months. Record high with today.
Price agency S&P Global Platts said on Septem- “At the extreme, it would not be a surprise if
ber 30 that its Japan-Korea-Marker (JKM), a some gas or LNG cargoes could even change
benchmark for spot LNG contracts, had risen to hands in the $100 per mmBtu [$2,766 per 1,000
$34.47 per million British thermal units ($953.44 cubic metres] range, or ~$580/bbl in oil-equiv-
per 1,000 cubic metres). This breaks the previous alent terms, based on observing how prices have
record of $32.50 per mmBtu ($898.95 per 1,000 spiked in the US gas market, for example, over
cubic metres), which was reached in mid-Jan- the past ten years,” Citigroup said in a note last
uary 2021 according to the agency. It comes week.
after spot prices fell to a record low of $1.85 per Current increases show that countries such
mmBtu ($51.17 per 1,000 cubic metres) in May as China are trying to plan ahead for potential
2020, amid severe pandemic-related lockdowns demand spikes over the winter, but if supply
across much of the world. constraints cannot be resolved quickly, it will

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