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Global Gas: Asian LNG testing oil prices

21 Dec 2017 17:47 GMT
Global Gas: Asian LNG testing oil prices

London, 21 December (Argus) — Northeast Asian LNG prices climbed to fresh highs in recent weeks and closed just short of levels that would put them at parity with crude markets.

The ANEA front half-month price has peaked in recent winters close to the cost of oil. And a crude market rally in recent months raised this potential price ceiling for LNG.

Strong Indian demand — with LNG receipts climbing in November — has supported global LNG prices. And China plans to further raise LNG imports, which have already soared in the past two years.

Some countries used more oil in the power sector when LNG prices have become uncompetitive in recent years.

ANEA prices rose to just short of oil parity in January, which coincided with utilities stepping up their fuel oil use. But gas consumption was also strongest last winter in the same month, as cold weather boosted demand.

Higher oil consumption at the expense of LNG was more pronounced in winter 2015-16. ANEA front half-month prices were on average above North Sea Dated in December 2015-January 2016.

Utilities' oil consumption in January 2016 was the highest since February 2014 and not surpassed the following winter. And their gas consumption of just under 5mn t of LNG equivalent in January 2016 was well below peaks in other winters, such as the 5.49mn t in January 2017.

South Korea also increased power generation from oil in November-December 2015, while reducing gas-fired generation. But power sector gas demand climbed in January 2016 and oil-fired generation was lower.

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Japanese utilities' fuel consumption in 2015-16 winter

Asian LNG close to oil prices $/mn Btu

South Korean power mix in 2015-16 winter GWh/d