Platts’ February LNG Japan Korea Marker averaged $15.937/MMBtu December 16, 2011-January 13, 2012, down 7.6% from the average January JKM last month on thin

trading, as warm weather and comfortable inventory levels in North Asia failed to stir winter buying interest.

The February JKM was up 61.7% year on year. The last North Asian deal heard was done in early December for a cargo to be delivered in February and bought by Japan’s Kansai Electric from Spain, although the deal was not confirmed by the parties reportedly involved.

China’s PetroChina, as well as Japan’s Kyushu Electric and Tokyo Electric Power, also bought February cargoes, sources said.

The latest sell tender was for a single free-on-board cargo from Nigeria LNG, closing January 19, with four different loading windows from late February to March.

Prices fell 7.6% in February from the January average JKM of $17.255/MMBtu, extending the fall to two straight months from December’s monthly average of $17.383/MMBtu.

The decrease in February prices since December contrasted to the 2.2% increase in prices between January and February last year.

Buyers were not rushing to buy February cargoes, and would prefer to “take a back seat at the moment,” especially with the current bearish price trend, sources said.

Sellers this month were more open to revising their offers, as buyers entered the holiday season, leaving limited trading days to complete deals.

Sellers lowered offers for February cargoes into North Asia to the mid-$15s/MMBtu by early January from about the $17s/MMBtu in mid-December, with several Indian buyers taking advantage of weak North Asian demand to buy cargoes for February delivery at competitive prices. India’s GAIL, Reliance, and Petronet each bought February spot cargoes, sources said. Japan is in the middle of its peak winter power demand season, which typically runs December through March.

Weather and nuclear utilization rates direct affect crude, fuel oil and LNG consumption for thermal power generation. Most regions in Japan are expected to experience below-average temperatures January 14 to February 13, the Japan Meteorological Agency said Friday.

Nuclear power generation in Japan continued to decline in January – Only five nuclear reactors are now operating in Japan with combined capacity of 5.058 GW, representing 10.3% of the country’s total installed capacity of 48.96 GW from 54 reactors, according to Platts calculations. The latest shutdown was Shikoku Electric’s 566-MW No. 2 reactor at its Ikata nuclear plant in western Japan, shut Friday.

Japan could see all its nuclear power output shut by May, as a result of additional stress tests imposed by the government, and regulations that require nuclear power plants to do maintenance at least once every 13 months.

The UK National Balancing Point saw front-month futures average $8.534/MMBtu December 16-January 13, down 5.4% year on year and 8.4% from the previous month’s average of $9.318/MMBtu.

The spread between the JKM and the NBP averaged $7.375/ MMBtu in the assessment period, down from $7.790/MMBtu on average from a month earlier.

Although the spread decreased, it remained wide enough to pull cargoes from the Atlantic Basin to Asia, although a shortage of vessels, higher Asia Pacific freight rates of $147,000/d and the need to continue established relations with buyers in Europe maintained the spread.

The US market has been relatively bearish, with front-month New York Mercantile Exchange Henry Hub gas futures averaging $3.028/MMBtu December 16-January 13, down 29.7% year on year and 11.7% month on month.

February marked the seventh consecutive month of declining front-month Henry Hub gas futures. The last time the Henry Hub contract increased was during the May 16-June 15 2011 period for July.

US gas prices have remained fairly low largely due to mild winter weather, abundant domestic production from unconventional sources and high storage levels.

The spread between the JKM and Henry Hub gas futures was $12.890/MMBtu over the same period, down from $13.766/MMBtu a month earlier.

Alternative fuel showed year-on-year gains. Platts’ FOB Qinhuangdao coal price averaged $5.166/MMBtu December 16-January 13, up 1.0% year on year, but down 3.6% month on month.

Meanwhile, Platts FOB Singapore 180 CST fuel oil averaged $17.847/MMBtu, up 33.5% year on year, and 1.2% month on month.

Tags: Platts