SINGAPORE - Asian liquefied natural gas (LNG) prices this week have dropped to their lowest in nearly three years as record supply lands on global shores and high inventory levels in North Asia are curbing import demand.
The spot prices for LNG cargoes to be delivered into Northeast Asia in May fell this week to a nearly three-year low of $4.30 per million British thermal units (mmBtu), according to several trade sources.
The spot price for Northeast Asia LNG was last assessed at $4.65 per mmBtu on March 21, Refinitiv Eikon data showed. The price quoted by the trade sources on Wednesday is the lowest since the week of April 15, 2016, when Refinitiv data showed it at $4, the lowest ever for data going back to 2010.
Gas inventories in Asia are high and buyers are shunning cargoes and re-directing them to Europe, the sources said.
"It's tank top situation in many places and inventories are high," a Singapore-based LNG trader said, speaking on condition of anonymity.
"There's really no or minimal demand... it's an oversupplied market."
Many companies were offering cargoes which were also weighing on spot prices, the traders said.
Several Chinese companies were reselling cargoes they did not need while at least one Indian company had diverted a cargo to Europe, two traders said.
With Chinese companies having signed up mid- to long-term contracts last year to receive LNG in anticipation of a big pick up in demand during winter which never happened due to mild weather, supply into the country was ample, a Chinese LNG trader said.
"It's not about price but about demand and the capacity in China. We cannot receive more cargoes and right now many sellers are trying to sell cargoes into west," he said.
LNG import volumes into Northeast Asia in March are set to rise by 3 percent from February while imports of the super-chilled fuel into North West Europe are set to jump by 70 percent to a record high in March, Refinitiv data showed.
The Japan Korea Marker, the benchmark for Asian spot LNG cargoes, has fallen below the Title Transfer Facility price in the Netherlands, an European benchmark which is currently at about $4.80 per mmBtu, the traders said. That is encouraging the diversion of cargoes from Asia to Europe, they said.
While Indian buyers were taking advantage of lower spot prices to buy cargoes, limited import capacity will curb their purchase volumes, a trader familiar with the market said.
Globally, LNG supply is expected to grow by an estimated record 40 million tonnes, or 13 percent, this year, potentially putting further pressure on Asian LNG prices.