Prices of spot liquefied natural gas (LNG) for July delivery to Asia fell 9.5% to an average $12.951 per million British thermal units (/MMBtu) on a month-over-month basis, according to the latest Platts Japan/Korea Marker (JKM) for month-ahead delivery.
The price decline is largely the result of high LNG inventories on the back of a warmer than average winter season. Today’s data reflects the daily Platts JKM for July as assessed between May 16 and June 13 and expressed as a monthly average.
The Platts JKM for July was 10.6% lower than the July 2013 average of $14.485/MMBtu; the lowest monthly average since June 2011, when the average price dipped to $12.45/MMBtu.
This is the fourth consecutive month of price decline in the Platts JKM. Since it reached historic highs of $20.20/MMBtu for March delivery, as assessed on February 14, 2014, the marker has lost more than 40% of its value.
The price of LNG for July delivery started the month at $13.625/MMBtu before closing at $12.025/MMBtu, the lowest daily level since April 14, 2011, when the JKM for May delivery was assessed at $11.85/MMBtu.
“The startup of Exxon’s Papua New Guinea LNG facility and its added supply has exerted significant downward price pressure on the market,” said Stephanie Wilson, managing editor of Asia LNG at Platts. “Supply pressures are also resulting from additional tenders by Asia-Pacific liquefaction projects as buyers take less volume via term contracts.”
Weather and second-half plans are exerting their own pressures to prices, said Wilson. As Platts has reported, state-owned Korea Gas is seeking to place time swaps for upwards of 20 cargoes in the second half of the year, which will likely keep downward pressure on prices. Also, temperatures in northeast Asia have been moderate during the start of the summer air-conditioning season, which means electricity use has not yet demanded the need for additional spot cargoes of LNG.
The price of competing fuel, thermal coal, was lower by 6.8% on a month-over-month basis, while fuel oil was up by 0.2% during the May 15 to June 13 assessment period.
Press Release, June 18, 2014