Excess supply drives Asia LNG to 10-year low

Stephen Stapczynski July 31, 2019

SINGAPORE (Bloomberg) --Natural gas in Asia is heading toward the lowest price in a decade, possibly extending pain for global oil majors suffering from the fuel’s weakness.

The latest bad news for bulls came this week, as China National Offshore Oil bought a liquefied natural gas cargo for early September delivery to China at about $3.90/MMBtu, according to traders with knowledge of the transaction. The region’s benchmark price, the LNG Japan/Korea Marker, briefly touched $4/MMBtu in April 2016, but hasn’t dropped below that since 2009.

The LNG market has been flooded by the startup of projects in Australia and the U.S., while mild weather across North Asia cuts consumption. Slumping prices mean global oil majors including Total SA and Eni, which saw weak gas hurting profits last quarter, may not yet be in the clear.

The slump may also add pressure on sellers fielding requests by customers to rework long-term deals linked to oil, which now can be over twice as costly as spot levels. A current dispute between Japan’s Osaka Gas and an ExxonMobil-led venture has been flagged by analysts at Credit Suisse Group as a possible “bellwether” across the market.

The JKM marker was assessed at $4.11/MMBtu on Tuesday, compared to $9.88/MMBtu a year ago, according to S&P Global Platts. The intraday Platts assessment for a cargo delivered to North Asia in the first half of September was $4/MMBtu on Wednesday, down $0.12.5 from the previous day.

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