Asian LNG imports surged by more than 10% in the first half of June, potentially signalling a more aggressive return of Asian buyers ahead of the summer cooling season.
After declining by 7% through March and May, Asia’s LNG imports surged by more than 10% yoy in the first half of June, potentially indicating a more aggressive return of Asian buyers amid the start of the cooling season.
Asia has been the most hit by the closure of the Strait of Hormuz, with the region receiving more than 25% of its LNG imports through the Strait. LNG inflows fell by 7% (or 6 bcm) yoy through March-May amid the steep decline of Qatari supplies. China alone accounted for almost half of the reduction, highlighting its growing role as a balancing market in the global gas system.
In contrast, Asian LNG imports surged by more than 10% in the first half of June, with flexible LNG cargoes increasingly choosing Asia as a destination market, supported by the hefty $2/mmbtu premium at which JKM has been trading since the beginning of March.
The recovery is largely led by India and other emerging Asian markets, often considered as the most price sensitive ones. This highlights, that natural gas is playing an increasingly important and indispensable role in their energy systems.
Stronger LNG imports are likely supported by Asia’s surging cooling needs amid the summer heatwaves and hence more electricity demand, which on the margin is often met by flexible gas-fired power plants.
A more intense competition from Asia could also reduce LNG inflows to Europe and hence weigh on European storage injections. And while Hormuz could reopen it would take at least 8 weeks to ramp-back LNG supply to available capacity.
What is your view? How will the summer LNG market look like? Are Asian buyers back in the game? What does it mean for Europe?
Source: Greg Molnar
