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Asia LNG 2011 winter price curve broken on warmer weather

Hong Chou Hui in Singapore

January 31, 2012 - Asia's 2011 spot LNG price curve for the peak winter demand season was broken by a combination of warmer weather, early stockpiling of cargoes and cooler than expected summer, according to an in-depth analysis of Platts data.

In the winters of 2009 and 2010, Platts Japan Korea Marker assessment of spot LNG cargoes delivered to Japan and Korea picked up across the months of November through February. (See related table: JKM monthly average)

In the recent winter of 2011, however, Platts JKM was relatively stable for cargoes delivered to Japan and South Korea in November and December at $17.25/MMBtu and $17.38/MMBtu respectively, before climbing down to $17.25 for January and giving up further ground to $15.94/MMBtu for February shipments.

Analysis continues below...

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North Asian countries such as Japan and South Korea usually begin stockpiling physical LNG cargoes from October and November in preparation for the peak winter demand season which starts in December and ends February. Both north Asian nations combined bought almost half of world's total LNG of 221 million metric tons [mt] in 2010, with Japan buying more than 30% [70 million mt] while South Korea purchased around 15% [33 million mt].

LNG is used by utilities for power generation and demand for heating during winter in north Asia has a direct impact on LNG requirements and prices.

Spot LNG buying activity from South Korea was especially intensive during the winter months of late 2009 and early 2010 with 13 cargoes from Nigeria, USA, Peru and Norway delivered to the country, as freezing temperatures swept across north Asia.

This was repeated during the winter of late 2010 and early 2011, when South Korean buyers purchased several spot cargoes from Nigeria, USA, Peru and Norway matching the JKM values for the same month of delivery.

In November 2011, however, the weather was unseasonably warmer in Japan and Korea compared to previous years, according to data from the US' National Aeronautics and Space Administration. (See related table: Temperature differentials for Seoul and Tokyo)

In the capital city of South Korea, Seoul, the average temperature for November 2011 was more than three degrees Celsius above the 20-year norm from 1991 through 2010.

It was the same in Japan's capital city of Tokyo, though markedly less so where the average temperature for November last year exceeded the 20-year norm's by slightly more than one degrees Celsius.

Next page: Pre-winter buying, cooling summer reduce winter requirements

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