LNG spot prices hit 17-month low
Drop in the market in Asia, one of the top consumers, comes amid weak demand and warmer weather
Spot prices for liquefied natural gas have tumbled to a 17-month low in Asia during an unusual stretch of tepid demand and warmer-thanexpected weather.
Asia is one of the biggest consumers of LNG and a vital customer for emerging U.S. producers. While much of that gas is bought on long-term contracts, the spot market still is an increasingly important indicator of the direction of the industry as more deals get done there.
Activity on the global spot market jumped 37 percent last year from 2017, according to S&P Global Platts, a data and analysis firm that tracks and assesses prices.
S&P Global Platts analysts said spot prices for LNG in Asia have plunged 27 percent since the start of the year. Prices for LNG delivered in Asia were $6.80 per million British thermal units a week ago. By Friday, they fell to to $6.47 mmtu by Friday, according to Platts.
“This is a massive drop,” said Madeline Jowdy, senior director of global gas and LNG at S&P Global Platts Analytics.
Chinese demand remained slow as many factories were closed for the Chinese lunar new year. Asia also had a warmerthan-expected winter this year, said Ciaran Roe, global director of LNG at S&P Global Platts.
Meanwhile, spot prices at Henry Hub, a central delivery point in Louisiana, were down 91 cents this week, falling to an average of $3.13 per mmbtu since January, according to the Energy Department. Although a cold snap in late January put parts of the county in a deep freeze, overall average temperatures were milder in much the nation, pushing prices down, the department said.
Strong growth in natural gas production is likely to keep natural gas prices low in 2019, the Energy Department said, which could pressure prices and profits for LNG exporters.
Most short-term LNG deals are done on an index based on oil prices. But as natural gas, once primarily bought and sold in regional markets, becomes a global commodity, more LNG sales are based on natural as indexes, including JKM (a Japan/South Korea price marker published by S&P Global Platts), European spot prices and a U.S. FOB price.
So far, a single pricing index has yet to emerge for the global LNG market. Many U.S. producers index prices against Henry Hub. The Houston LNG exporter Tellurian, which is developing an export complex south of Lake Charles, La., plans to use JKM spot market pricing for its first major LNG contract with Vitol, a Dutch energy and commodities company.