ASIA SPOT LNG: Platts Feb JKM up to $17.40/MMBtu on cold spell

Singapore (Platts)--4Jan2013/706 am EST/1206 GMT


The Platts February LNG Japan Korea Marker ended the Asian trading week at $17.40/MMBtu, up from Monday's $17.15/MMBtu, on the back of sustained demand stemming from cold weather in the Far East.

Low temperatures across North Asia boosted heating needs in the region and increased demand for LNG in China, Japan and South Korea.

China National Petroleum Corp. agreed to increase gas and LNG imports, and also hike production from its fields to meet domestic needs, the Xinhua news agency reported Sunday. China's winter gas demand has soared in the wake of continuous rain and snow that has lashed the northern regions of the country.

The world's largest LNG buyer -- Japan -- is also forecast to see colder-than-average weather for six of the country's 12 regions over January 5 to February 4, according to data released by the Japan Meteorological Agency Friday.

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Five of the remaining regions are expected to experience colder-than-average temperatures or temperatures around the 20-year average, based on JMA.

Also in North Asia, the South Korean capital city of Seoul recorded a temperature of minus 16.5 degree Celsius Thursday morning, the lowest in 27 years, the Korea Meteorological Administration was reported as saying by the Yonhap News Agency. A cold wave watch for Seoul and its surrounding Gyeonggi province, and a cold wave alert for the central part of the country have been issued, the agency said.

With KMA adding that the cold spell is only expected to ease around February, LNG inventories in South Korea could be drawn down significantly.

But slightly relieving the pressure on the spot market, South Korea restarted two of the three nuclear reactors that have been shut since early November for safety reasons, the energy ministry said on Wednesday. The 1 GW No. 6 reactor at the Yeonggwang plant, on the southwest coast, restarted Wednesday, and the 1 GW No. 5 reactor at the Yeonggwang plant has been back online since Monday.

To meet the North Asian demand fueled by the cold spell, remaining supply in the market will largely be from the Atlantic.

"If buyers want to move Atlantic cargoes to the Pacific, they will have to bid for them at attractive prices, as they have to compete with the strong demand from South America and Europe," a source with a producer said, adding "most Atlantic offers are in the high-$17s/MMBtu level."

Further supporting stronger spot prices, trade sources said Thailand's PTT could be looking to secure a spot cargo for delivery in second-half February via a private tender or through bilateral purchase negotiations.

Meanwhile, spot trading was largely subdued with Japan and China closed for most of this week, despite Atlantic players returning to the market after year-end holidays.

Platts assessed February DES West India at $15.05/MMBtu Friday, stable from Monday.

"India is not ready to cross $15/MMBtu at best anyway," a Singapore-based producer said, although his offer to the region was beyond $16/MMBtu.

"Indian buyers are bidding at around $14.50/MMBtu for February cargoes," an Asian importer said, adding that buyers there were depending more on term contracts for their volumes as it was hard to compete with the strong demand and spot prices from the Far East.

The Platts Asia Pacific Day Rate gained $10,000 over the course of the week to $120,000/day.

Spot charter rates are likely within the range of $120,000/d to $130,000/d, a shipping source said, adding that owners were receiving more interest for their vessels recently.

"Most of the vessels are occupied for cargoes transacted on a delivered ex-ship basis," a trade source said, adding that even if a free-on-board cargo was available, it would be hard to find suitable vessels hence driving up shipping rates.

--Chloe Hang, chloe_hang@platts.com
--Edited by James Leech, james_leech@platts.com





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