SINGAPORE, April 21 (Reuters) – Volumes of liquefied natural gas (LNG) stored at sea have increased on an annual basis this month, driven by more vessels in Asia amid high inventories and slow spot demand in Japan, China and South Korea, analysts say.
Additional supplies of the super-chilled fuel could further weigh on Asian spot prices, providing some relief ahead of summer when demand is expected to rise.
Global floating inventories of the super-chilled fuel were at 0.55 million tonnes on April 20, showed data from analytics firm Kpler, up 0.24 million tonnes from the same time last year.
“There are currently more floating volumes on a global level and the increase is coming out of Asia… Reflecting tepid demand from major consumers Japan, China, and South Korea,” said Kpler LNG analyst Ana Subasic.
The number of vessels around Europe have dropped to average levels after operations at French terminals resumed following strikes, Subasic added.
“Both regions have now exited what was a mild winter of 2022-2023 with higher-than-average gas stock levels for the time of the year, which will account for limited demand growth.”
Bank of America said in an April 17 research note that floating storage levels are at or above a five-year seasonal high, “putting the market in a precarious spot ahead of summer build season.”
Asian prices have been pressured by weak spot demand and high inventories, shedding nearly 60% this year to $12 per million British thermal units (mmBtu). LNG-AS
According to Japan’s Ministry of Economy, Trade and Industry, LNG inventories of major power utilities stood at 2.42 million tonnes as of April 16.
This is above the 1.63 million tonnes at end-March 2022, and above an average of end-March inventories over the past five years at 2.07 million tonnes.
South Korea’s LNG imports also tapered last month with shipments at 4.07 million tonnes versus 4.95 million tonnes imported in March 2022.
China, typically a net importer, actually exported a monthly record 156,718 tonnes of LNG in February, according to customs data that goes back to 2015.
Nuclear plant restarts have capped demand in Japan and Korea, while China is relying more on coal.
“China has been using more coal for power generation. There aren’t really margins yet for Chinese players to import spot LNG and sell in the domestic market,” said Lee Ken Kiat, senior LNG analyst at FGE.
While stronger demand for LNG is expected in both regions in the coming months, the volume of growth remains uncertain.
“The key question is Europe’s pace of gas injections for winter… Asia demand would depend on weather — India and Thailand are already starting to experience heat waves.”