THE fall of crude prices since mid-2014 has captured the world's attention. Lesser attention has been paid to the sharp decline in the spot price of liquefied natural gas (LNG) in Asia, which could bring cheer to the long-term positioning of Singapore as the LNG hub for Asia.

Spot prices of LNG in Asia have been on a downward trend over the past six months, dipping to multi-year lows of US$6.2 per mmbtu in February 2015. The dip in prices is due to lower demand from Asian economies (mainly Korea) and greater use of coal in some markets. It may appear that the current drop in price is temporary, and that Asian LNG prices should recover fairly quickly. However, structural changes to both supply and demand could well keep Asian LNG prices soft until 2020.

THE SUPPLY-DEMAND TUG-OF-WAR