The preliminary January LNG spot price was more than double the $7.4/MMBtu average for December, and above its previous high of $18.3/MMBtu in March 2014, according to METI data. METI also said the average price of cargoes delivered into Japan in January stood at $15.5/MMBtu, more than double from $6.8/MMBtu in December.
The January price increase was due to Japanese power utilities buying spot LNG to make up for depleting inventories when severe cold spells, snowstorms and low solar power output tightened Japan’s power supply and demand balance in early January.
Spot procurement by Japanese utilities also came amid growing LNG cargo shortages in the wider region and supply bottlenecks that prevented US LNG cargoes from being shipped to North Asian demand centers in time.
These factors led to Asian LNG spot prices hitting an all-time high of $32.50/MMBtu in mid-January, with spot prices averaging $18.309/MMBtu for February and $8.173/MMBtu for January, S&P Global Platts data showed.
Prices have eased since then with a warmer weather outlook for March – the S&P Global Platts JKM for March was assessed at $7.615/MMBtu on Feb. 8.
“From freight availability to LNG loadings, the supply-side of the global LNG balance has been anything but soft,” S&P Global Platts Analytics said in its Global LNG Monthly Forecast dated Feb. 8.
“While this may have catalyzed the Jan. 21 rally, Platts Analytics sees a slow, but steady, normalization in both global supply and freight rates as markets barrel toward summer,” it said, adding that while North Asian inventory levels are below historical levels, demand from restocking will be spread through the remaining months of the first half of 2021.
LNG stocks held by Japanese utilities hit a seasonal high of about 1.9 million mt around Dec. 9, 2020, after increasing from the second half of November, before dropping to a Jan. 11 low of 1.16 million mt, data showed.
Stocks then rebounded to 1.43 million mt on Jan. 17 as the country recovered from its recent cold spell, according to a survey released Jan. 19 by METI.
The rebound in LNG stocks likely shows that Japanese utilities have overcome the worst of the gas shortages that led to record high power prices in recent weeks, and the modest demand outlook for the rest of winter means that additional buying interest will be limited.
Platts Analytics said that while any late–season cold snap would likely mean additional volumes would be needed to help refill gas inventories, gas demand in the power sector broadly will soften as the Japanese nuclear fleet sees the return of four reactors by the end of March 21.
In the wider market, the Lunar New Year holidays in China and widening transportation restrictions are likely to keep gas demand under tabs and spot prices low for Japanese utilities.
METI’s spot LNG price data is a simple average of contract prices transacted in a given month, calculated by the ministry, which gathers data from utilities and other LNG buyers in the country. The delivery months of the cargoes into Japan are not disclosed.