Freezing temperatures push Asian gas prices to new records

Freezing temperatures across Asia and Europe are sending the prices of liquefied natural gas (LNG) to new record highs as buyers grapple with depleting inventory and a shortage of tankers to ship the cargoes in.

But with the forecast indicating the return of milder weather, prices may peak soon as demand for heating fuel diminishes, traders and analysts said.

S&P Global Platts' Japan-Korea-Marker (JKM), which is used as a reference point for Asian spot LNG prices, rose to $28.221 per million British thermal units (mmBtu) on Monday for a cargo to be delivered in February, while at least one Japanese utility paid over $30 per mmBtu for a cargo to be delivered in late January, traders said.

Spot Asian LNG prices have led the energy complex, gaining more than 1,000% since touching a record low below $2 per mmBtu in May during lockdowns to stem the spread of the coronavirus.

Asia LNG prices surge to new record on freezing temperatures across north Asia 

"Supply is super tight in the prompt months and inventory levels are quite low in many places," a Singapore-based LNG trader said.

"But, as the weather gets mild and supply gradually returns, the situation might improve."

Temperatures are expected to rise to above average in Tokyo, Beijing, Seoul and Shanghai over the next few weeks, weather data from Refinitiv Eikon showed.

Supply also appears to be increasing with Shell resuming cargo loadings from its Prelude floating facility in Australia after it was offline for nearly a year, and increased loadings from Qatar, Russia and the United States, shiptracking data from Eikon showed.

"We expect the current tightness to moderate in coming weeks," Goldman Sachs said in a note on Monday, also citing a continued drop in LNG deliveries and an increase in reloads in Europe, in addition to the milder weather and increasing supply to Asia.

Still, limited LNG tanker availability may keep spot LNG prices elevated, traders said.

LNG tanker rates have more than doubled from a month ago, with the daily charter rate for shipping LNG in the Atlantic basin rising to a record $322,500 a day as of last Friday, said Tim Mendelssohn, managing director at Spark Commodities.