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The Asia-Pacific LNG market experienced a surge in activity during the Platts Market on Close (MOC) assessment process in February, as the Platts Japan-Korea Marker (JKM) - the pivotal benchmark reflecting LNG delivered to Northeast Asia - plummeted to a multiyear low, data from S&P Global Commodity Insights revealed.
In February, the physical MOC witnessed a remarkable increase in participation compared to the previous year. According to S&P Global data, 12 entities reported a total of 103 bids, offers, and trades, contrasting with only four entities reporting 20 bids and offers in February 2023. The sole trade recorded in February exemplified the market dynamics, with Glencore purchasing a 3.3-3.6 Tbtu cargo from Unipec at JKM balance-month next-day plus 5 cents/MMBtu on February 29. Spot LNG prices in the Asia-Pacific region plunged to historic lows, with the Platts JKM assessed at USD 7.981/MMBtu on February 26, marking the lowest level since April 15, 2021. Record-low prices enticed buyers, particularly from Southeast Asia, South Asia, and China, leading to a flurry of buy tenders and spot cargo procurements in the bilateral market. The rise in bids during the physical MOC, up by 20.51 per cent from the previous month, indicated heightened interest in spot cargoes. Traders pointed to tighter supply conditions as a reason for fewer offers during the MOC for deliveries in the first half of April compared to the latter half. The majority of bids, offers, and trades during the MOC were floated-price based, with derivatives serving as hedging instruments amid declining flat prices. Notably, 65.05 per cent of reported bids, offers, and trades were linked to the Platts JKM index. The derivatives MOC also witnessed a surge in activity, with 14 entities reporting 843 bids, offers, and trades, significantly higher than the 147 reported in February 2023. The balance-month next-day contract garnered substantial attention, with 335 reported bids, offers, and trades. Additionally, the JKM-WIM spread contract saw increased activity, with Vitol securing 25 lots from BP at 20 cents/MMBtu on February 14, marking the first activity since November 2023. The futures market experienced significant traction, with total traded volumes reaching a multiyear high. Exchange data revealed a 24.74 per cent increase in LNG futures traded volumes cleared on financial exchanges in February compared to the previous month, marking a staggering 109.19 per cent surge year-on-year, reaching 91,780 lots, the highest since September 2021. The dynamic activity across physical and derivatives trading underscored the impact of plunging Platts JKM prices, enticing buyers and prompting increased hedging activity amid market uncertainties. (ANI)
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