Asia LNG Physical MOC Trading Hits Record High on Winter Surge
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Trading activity in Asia's liquefied natural gas (LNG) physical market-on-close (MOC) process for January reached an all-time high, driven by increased trading of winter-delivery cargoes, reports S&P Global. The total number of bids, offers, and trades reported during the pricing period, which ran from November 16 to December 15, surpassed the previous record set in the same period last year.
The January JKM pricing period saw a total of 367 bids, offers, and trades, exceeding the prior record of 335. This surge in activity is attributed to traders actively managing their portfolios in anticipation of fluctuating demand during the winter months.
Traders often speculate on potential price spikes during winter, leading to increased trading volume as they attempt to position themselves favorably in the market.
Eight major entities – BP, Engie, Glencore, PetroChina, Shell, Total Energies, Trafigura, and Vitol – reported 16 trades for December and January shipments to the Japan-Korea-Taiwan-China (JKTC) region, representing approximately 1.04 million metric tons of LNG cargoes.
Other market participants involved in the physical Platts MOC included ADNOC Trading, DGI, ENN, Freepoint Commodities, Hartree, Jera GM, Marubeni, Mercuria, SEFE, and Uniper. ADNOC Trading and BP also reported 17 bids for first-half January-delivery cargoes to Thailand.
A significant portion of the bids, offers, and trades – 59.13% – were priced against the JKM index. Market sources suggest that this approach is preferred over using a flat price, as it allows traders to mitigate potential risks associated with price fluctuations.
The average cash differential for bids, offers, and trades linked to the JKM balance-month next-day contract was reported at parity to the balance-month contract. This contrasts with the deeper discounted cash differential observed during the December JKM pricing period.
Despite the record trading activity, end-users across Northeast Asia remained on the sidelines due to mild temperatures and the availability of cheaper alternative fuels. Several sources indicate that most LNG cargo purchases were executed by portfolio players and trading houses.
Meanwhile, Asian spot LNG prices were supported by market concerns over the global LNG balance amid geopolitical and supply-side risks. The Platts JKM, the benchmark price for LNG delivered to Northeast Asia, was assessed at $14.877 per million British thermal units for January, up 9.56% from the December pricing period.
The derivatives Platts MOC saw a total of 1,519 bids, offers, and trades for the January JKM pricing period, down by 19.4% from the December JKM pricing period. Market sources attribute this decline to difficulties in reaching price agreements during the January JKM pricing period, as well as the upcoming holiday season.