Prices of spot liquefied natural gas (LNG) for March delivery to northeast Asia saw their largest year-over-year drop on record, plunging 61.7% from March 2014 to average $7.436 per million British thermal units (/MMBtu), according to latest Platts Japan/Korea Marker (Platts JKM™) data for month-ahead delivery.
This is the largest year-over-year fall since Platts began assessing the JKM in February 2009. The figure reflects the daily Platts JKM assessed between January 16 and February 13, expressed as a monthly average.
In 2014, March JKM daily prices had reached a historic high of $20.20/MMBtu on assessment date February 14. By comparison, March-delivery JKM prices in 2015 bottomed at $6.80/MMBtu on assessment date February 5, the lowest since June 2010.
“Moderate temperatures and high buyer inventories continued to cap demand for spot cargoes in northeast Asia, despite the lower prices in March,” said Stephanie Wilson, managing editor of Asia LNG at Platts, a leading global energy, petrochemicals and metals information provider and a premier source of benchmark price references. “Exacerbating the oversupply were cheaper competing fuels, which many utility power generators opted to burn rather than LNG.”
At $7.436/MMBtu, the monthly average JKM for March delivery had reached levels not seen since 2010, when the July monthly average was $9.639/MMBtu.
In the years following the 2011 Fukushima disaster and the subsequent loss of nuclear power in Japan, March JKM monthly averages had been consistently above $10/MMBtu.
The March 2015 monthly average had also dropped 25% from February, as the market shifted into a backwardated* structure, reflecting the seasonal reduction in demand going into the northern hemisphere spring. This exerted further downward pressure on prices, as buyers were in no rush to procure cargoes.