Lower LNG prices trigger surge in Asian spot market purchases

PRICE sensitive liquefied natural gas (LNG) buyers from China, India and parts of South-east Asia are snapping up more spot shipments of the fuel to power industries and generate electricity after prices have fallen to the lowest level in nearly three years.

The price-led demand revival could push LNG imports by the world’s top buyer China beyond its record volume of 78.8 million tonnes in 2021 and also raise India’s imports by about 10 per cent this year, analysts said, tightening global supplies and ultimately lifting prices.

Spot LNG imports by Asian buyers increased by nearly a third in the first quarter of the year to 161 cargoes, according to data from S&P Global Commodity Insights, when spot Asian prices averaged US$9.82 per million British thermal units (mmBtu). This is up from 125 in the same period of 2023, when prices averaged US$18.75/mmBtu.

Thailand’s Gulf Energy Development said it received its first-ever LNG cargo in February, while industry sources said Hong Kong-listed China Resources Gas will receive its first shipment in March. PetroVietnam Gas had also sought two spot shipments to be delivered from April, nine months after taking Vietnam’s first LNG cargo.

“We have seen some buy tenders coming in more frequently given lower Asian LNG prices, especially from price-sensitive buyers such as India, Vietnam and China,” said Ryhana Rasidi, LNG analyst at data analytics firm Kpler. “For this year, we believe that the increasing spot demand will contribute to raising overall Asian LNG demand.”

China Resources Gas and PetroVietnam Gas did not respond to requests for comment.

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Global gas markets have more supply after weaker-than-expected demand due to a mild winter and high stockpiles in the United States, Europe and Japan. Asian LNG prices were at US$8.30/mmBtu earlier this month, the lowest levels since April 2021, before seeing a slight boost to US$8.60/mmBtu due to the spot buying.

That is still far below the record US$70/mmBtu hit in August 2022 following Russia’s invasion of Ukraine that led some price-sensitive Asian buyers to switch to other fuels such as oil and liquefied petroleum gas.

Competitive prices

Pallavi Jain Govil, a senior official at India’s energy ministry, said Asian spot LNG prices of US$11/mmBtu and below were competitive.

“We are committed to doubling gas in our power mix in the next six years so we plan to import more LNG,” she told Reuters this week on the sidelines of the CERAweek energy conference in Houston.

India’s LNG imports could rise by about two million to three million tonnes this year to 24 million to 25 million tonnes, analysts said, with the increase by Asia’s fourth-biggest buyer driven mostly by spot purchases.

LNG was traditionally sold through long-term contracts but the spot market has become more active, accounting for about 35 per cent of global trade by 2022, up from 5 per cent in 2000, according to the latest data from trade association International Group of Liquefied Natural Gas Importers.

For some importers, the Asian spot price for April delivery had been lower than their oil-linked long-term contract prices, which range from US$10-12/mmBtu, a Rystad Energy report said.

In China, ICIS forecasts Chinese spot LNG purchases at 17 million tonnes in 2024, a one million to two million tonnes increase from last year when Asian spot prices averaged at US$17.68/mmBtu.

Increased LNG imports in China and India are not expected to significantly dent coal demand, as overall power demand continues to grow and both countries continue to prioritise domestically produced fuel, including coal.

“In China, demand will mainly come from industrial and commercial users,” said Alex Siow, lead Asia gas and LNG analyst at pricing agency ICIS. “If those players are unrestrained by price, they will buy gas.” REUTERS