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Weekly Summary

LNG: Mar 25-29: Increase in demand from Japan

--DES Northeast Asia

In the DES Northeast Asia market last week, front month delivery hovered around $9.60-9.90 once. An increase in demand from Japan and a rise in the Netherlands' TTF market due to attacks by Russia on gas storage facilities in Ukraine supported prices.

Demand from Japan was persistently regarded as strong. JERA has adjusted operations at several gas-fired power plants due to fuel constraints derived from delivery delays and increasing demand from low temperatures. Fresh information indicated that JERA would stop operations of more than 10 power units at four gas-fired power plants, such as the 5,160 MW Futtsu thermal power plant and the 3,420 MW Kawasaki thermal power plant starting Mar 28. A Japanese company concerned about the outage of the power plants said, "This is a massive outage, and it might take time to resume operation," and "The outage might be associated with Japanese buyers' previous stances―pushing LNG delivery back and cancelation―because they had carried a huge inventory and suffered from weak demand caused by warm winter." As reported, end-users in Japan had cut the import volume of LNG temporarily by exercising the DQT (downward quantity tolerance).

An end-user in China, on the other hand, appeared to stay sidelined in the market. "Chinese buyers won't buy at the current market prices. Their buying idea is $8's" was heard from a Japanese company. Moreover, the Chinese end-users appeared to find it difficult to earn profits when they imported LNG at $9's because of the decline in LNG domestic prices by trucks. "Buyers won't come back to the market until prices go down below $9.00" was heard from South Korean users as well; thus, most users have not been aggressive in buying cargoes amid the recent rise in prices.


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

In India, a perception of high price made the market participants subdued. Regarding the background of price sensitiveness among Indian end-users, a source in the utility industry pointed out the different usage between domestic natural gas and imported LNG. "Domestic natural gas and imported LNG are the main sources for the Indian gas market. Under government policy, however, domestic natural gas, which is cheaper than LNG, is mainly distributed to the traffic sector and general households, where demand is stable. In contrast, imported LNG is mainly used for business, industry, such as fertilizer, and the power ―sectors of price-sensitive and substitutable with other energy source sectors" (the same source). In the Arab United Arab Emirates (UAE), all four reactors in the 5,600MW Barakah nuclear power stations were in operation, and output from solar power stations was brisk. Thus, gas demand for power generation was dull.


--FOB Atlantic, DES Europe and South America

LNG exports from the 22.20 mil mt/year Bonny Island project in Nigeria have been weak. The scheduled volume of exports in Mar was 1.07 mil mt, down 11.6% from a month earlier and down 19.0% from a year earlier. The weak figure might be associated with less production caused by the damage to the pipeline in the country. In Nigeria, burglars who aimed to steal crude were said to damage the gas pipeline by accident.


Tokyo : LNG Team  Yamamoto   +81-3-3552-2411Copyright © RIM Intelligence Co. ALL RIGHTS RESERVED.