LNG price decline attracts emerging market buyers
The decline in LNG prices has recently attracted buyers from emerging economies in Asia and South America who were unable to afford sky-high prices last year.
Southeast Asia and Latin America were the biggest buyers of spot LNG for a second consecutive quarter in the first quarter, according to estimates from BloombergNEF. In Southeast Asia, the Philippines and Vietnam have recently purchased their first-ever LNG cargoes.
Earlier this year, South Asia returned to the spot market for liquefied natural gas (LNG) as prices dipped to the lowest in a year and a half, prompting the price-sensitive buyers in the region to buy the fuel which was prohibitively expensive last year.
South Asian economies India, Pakistan, and Bangladesh showed signs of activity on the spot LNG market in February and March, encouraged by the more than 70% slump in prices since the record highs seen in August 2022.
Prices have further dropped since then.
In the week to May 19, Asia’s spot LNG prices dipped to below $10 per million British thermal units (MMBtu) for the first time in two years. Spot LNG prices have now plunged by 86% compared to the record high seen in August last year, when natural gas prices in Asia and Europe soared amid concerns about supply ahead of the winter.
Going forward, prices will determine whether South Asia will continue buying spot LNG. Intensified competition between Asia and Europe will drive prices higher, which in turn will reduce the purchasing power of price-sensitive LNG importers such as India, Bangladesh, and Pakistan.
“Going forward, it will be a tug of war for the marginal cargo. We do see more shift of flow into Asia and of course the prices of the LNG in Europe and Asia will, to some extent decide where the cargoes will be flowing,” Oystein Kalleklev, the chief executive of shipping firm Flex LNG, said on the company’s earnings call in February.
