The global Liquefied Natural Gas (LNG) market encountered difficulties and fluctuations during the week of January 22-26, 2024. According to S&P Global Commodity Insights, milder temperatures in Europe and the United States weakened the outlook for LNG prices. The situation in the Red Sea added uncertainty to market dynamics.
Platts, a part of S&P Global Commodity Insights, reported that the March Japan Korea Marker (JKM) was assessed at USD 9.206/MMBtu on January 22. The Western Bharat market for March was assessed at USD 9/MMBtu. However, global LNG prices were expected to stay weak due to the return of milder temperatures.
European LNG prices saw a downward trend influenced by mild weather conditions and robust gas inventories. Despite sporadic cold spells and geopolitical tensions in the Red Sea, prices in Northwest Europe and the Mediterranean did not witness a substantial uptick. The DES Northwest Europe Marker for March was assessed at USD 8.357/MMBtu on January 19, showing a daily increase but a significant weekly decline.
Gas storage levels in the European Union (EU) slightly decreased, but LNG inventories remained healthy. Traders approached the market cautiously, testing it opportunistically rather than engaging in significant trading activities. The bearish sentiment was expected to persist due to milder temperatures and weak industrial and economic activity.
In the United States, the FOB Gulf Coast Marker was assessed at USD 7.12/MMBtu on January 19, reflecting an increase on the day but a notable decrease on the week. High inventories and milder temperatures dampened demand, despite increased US LNG exports in January, with a significant portion directed to Europe.
S&P Global analysts highlighted the impact of the Cape of Good Hope route, emphasizing its low risk and predictability in loading and discharging times. However, the longer travel distance increased overall transportation costs. LNG swaps faced a bearish sentiment as milder temperatures persisted, and buying interest remained lower than expected in both Europe and Asia.
On the Northwest European forward curve, full-month March was assessed at USD 8.298/MMBtu, with April 2024 and May 2024 at USD 8.218/MMBtu and USD 8.235/MMBtu, respectively. Traders anticipated March and April for potential buying interest, closely monitoring weather forecasts. The impact of events in the Red Sea and alternative shipping routes added complexity to market dynamics, with potential consequences for shipping rates and gas prices.
In conclusion, the global LNG market continued to navigate a challenging landscape, influenced by weather conditions, geopolitical events, and shipping dynamics. The prevailing bearish sentiment in the short term kept market participants vigilant for potential shifts in demand and supply dynamics.
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