--DES Northeast Asia

In the DES Northeast Asia market last week, front month delivery dipped around $8.40-8.70, the lowest level since early June 2023. With the Lunar New Year holidays, end-users from China and South Korea were hardly seen in the market. Thus, buying interest was generally dull in Northeast Asia. In addition, a Japanese company stated, "Market players keep spring in mind, so sentiment turns to be bearish."

Demand from Japan remained weak, according to European trader. Some Japanese end-users were requesting suppliers to postpone the arrival of long-term cargoes, and were exercising downward quantity tolerance (DQT) so that they could reduce import volumes in accordance with a fall in demand. In fact, a Japanese city gas company felt that slack supply/demand brought about consistent high inventories. The company expected that this status might continue until summer although it did not need reselling cargoes or swap deals. On the other hand, as the current DES Northeast Asia market was lower than term import costs, some buyers felt that the market was reasonable. Nevertheless, most end-users in Northeast Asia including Japanese energy utilities had limited tank storage capacity, compared with Europe. Hence, a Japanese trader pointed out that it would be difficult for them to build up inventories only for the reason of affordable prices.

In China, bargain hunting demand was expected this week after the Lunar New Year holidays. Sources reckoned that national companies might preferentially buy LNG cargoes in accordance with intentions form the Chinese government although there were no signs of improvement for LNG consumption. The Chinese government had led to active usage of renewable energy and natural gas for decarbonization in the early 2010's despite planned outage had taken place along with scarcity of electricity. Therefore, sources were paying attention to the Chinese government that might suddenly change its policy to increase the import volume of LNG considering decarbonization even though unit prices of coal were lower than those of LNG.

--FOB Middle East, DES South Asia and the Middle East

In India, a perception of affordable prices caused by falls in the market has created a new demand. LNG prices have dipped to a cheaper level compared with products for power, which in turn have strengthened LNG demand for power fuel, according to a trader. Demand from Kuwait has been weak, and a declining demand for power might be a reason for that. Kuwait Petroleum Corp (KPC) expanded the production capacity of the 615,000 barrel-per-day Al-Zour refinery. As a result, production of low-sulfur C fuel oil has increased, robbing LNG of its share of usage for power fuel.

--FOB Atlantic, DES Europe and South America

German state-owned SEFE appeared to extend procurement of LNG from the 16.50 mil mt/year Yamal project in Russia until the end of Dec 2040. The procurement contract was supposed to expire by the end of 2024, but the Russian government permitted its extension. LNG demand from Argentina has remained weak, and no cargo has arrived in the country since Oct 2023. Demand from the country has been limited during the period from Apr to Sep when temperatures drop in the southern hemisphere; currently, Argentia experiences between seasons.