Global LNG prices drop to lowest levels since April 2011

Asian spot prices for liquefied natural gas (LNG) dropped to their lowest level since the Fukushima nuclear crisis in Japan pushed up energy prices in March 2011 as low summer demand in the northern hemisphere was met by rising Asian output.

Spot LNG prices for new front-month August delivery fell to around $12 per million British thermal units (mmBtu) this week, over 40 percent lower than at the beginning of the year.

“Milder-than-usual weather in May and June has helped keep Asian demand modest. Supply is broadly ticking over, with the positives (Algeria, Nigeria and the first cargoes from Papua New Guinea) just outweighing the negatives (Egypt and Angola),” said consultancy Energy Aspects in a research note this week.

“The market is not so much treading water as diving to the bottom,” they added.

Mild weather and high inventory levels in Japan and South Korea, the world’s top two LNG importers, as well as in Europe, have kept a lid on demand for the fuel so far this summer.

Because LNG demand in Japan and South Korea has plummeted this spring, Qatar has been sending more cargoes than usual to Europe.

Reuters data shows Britain’s LNG import volumes this spring have been at their highest levels since 2012.

But analysts said that Asian prices may be close to bottoming out as the region switches from the low demand spring season to the high demand summer air-cooling period which will be followed by the peak demand winter.

“I would expect Asian spot LNG prices to rise back to around $14 per mmBtu by late summer and towards $17-18 by winter,” one LNG trader said.

Wire Reports