‘Cooler Asia summer may add to LNG woes’

SINGAPORE: Don’t count on a summer heatwave to rescue Asia’s liquefied natural gas (LNG) prices. Weather forecasts signal lacklustre demand in the largest importing region, raising prospects a global glut will deepen.

Temperatures across North Asia this summer would be cooler than a year ago, according to seven meteorologists surveyed by Bloomberg. This suggests the record heat in Japan and South Korea, which triggered a buying frenzy and catapulted prices to the highest since 2014, is unlikely to be repeated.

LNG prices in Asia have slumped about 40 per cent so far this year as the three biggest consumers — Japan, China and South Korea — have slowed spot buying after a mild winter and amid brimming stockpiles.

Meanwhile, new projects from Australia to the United States have left the market amply supplied.

“A cooler summer would mean that additional demand isn’t there, creating even more potential excess supply,” said BloombergNEF analyst Fauziah Marzuki.

While forecasters were split on whether temperatures in North Asia would be above or below historical averages, the overall expectations are that they will be milder and less volatile than last summer, which saw a price spike in June.

A cooler-than-normal summer could also push spot prices in Asia down to parity or even a discount to Europe, reversing their typical premium, according to Robert Sims, an analyst at Wood Mackenzie Ltd.

“We expect the real recovery will need to wait until winter this year,” said Sims.

Japan and South Korea recorded their hottest days ever last year. Temperatures peaked at 41.1°C in Kumagaya, a city north of Tokyo, and 40.7 °C in the northeastern South Korea town of Hongcheon.