(Greg Molnar) Despite JKM recovering by 40% in August, the average Asian LNG import price fell by almost 20% month-on-month, as the lower crude prices continue to filter through the price structure of LTCs.
This highlights at least two points:
(1) the prevalence of oil-indexation in Asian LNG import contracts;
(2) the growing tension between market fundamentals (driving JKM) and the regime of oil-indexation.
Taking into consideration the current forward curve, the oil-premium could fall from an astonishing $5/mmbtu through this year to $1/mmbtu this winter.
This does not overwrite the second issue point: oil-indexation is increasingly failing to reflect market fundamentals and hinders the right market reaction and the right time.
What is your view?
Will the current price environment favour oil-indexation? What will be the impact on spot this winter? Could TTF and JKM emerge as an alternative?
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