-LNG market not tight at around $15.00-

In 2023, the LNG market was quiet compared with the previous years. The DES Northeast Asia market hit the highest at $23.85/mmBtu on Jan 6. The market was on a downtrend after that and dropped to the $8's on Jun 2 for the first time in about two years. This was because supply/demand of gas loosened due to mild weather last winter and economic activities did not recover that much after the Covid-19.

The above graph indicates changes in the DES Northeast Asia market and the Netherlands' TTF market. Natural gas and LNG have close relations in terms of supply/demand fundamentals and prices. LNG prices tend to move in tandem with European natural prices not only for delivery to Europe but also to Northeast Asia. From around December 2022, market players began perceiving that worries about a shortage in gas in Europe would unlikely realize, which continued sending the TTF market lower from the beginning of 2023. Since gas inventories were not consumed that much amid mild weather in Europe and Northeast Asia last winter, market players refrained from purchasing. This exerted downward pressure on the market.

On the other hand, mild winter and high inventories are expected to continue having impact in Northeast Asia and Europe in 2024. A Japanese company said, "Market would unlikely be tight for the time being." Yutaka Shirakawa of the Japan Oil, Gas and Metals National Corporation (JOGMEC) said, "LNG prices in Northeast Asia in 2024 is forecast to be similar level to 2023." He predicted that prices would hover around an annual average of $15.00.

However, he said, "As we cannot deny the possibility that temperatures might unexpectedly fall sharply in January onwards, many end-users continue being wary of tight supply/demand fundamentals and a surge in the market." In addition, as restrictions to pass through the Panama Canal have been implemented owing to drought since November 2023, it is hard to supply LNG from the US to Northeast Asia. Under such circumstances, players are concerned about a rise in the market caused by unstable supply/demand balance.

Moreover, demand from China was unclear. If Chinese economy recovers with economic stimulus package, this would boost energy demand. The LNG import increased to 71-72 mil mt in China in 2023 and the country became the world's largest LNG importer again. In China, pipeline gas was imported from Russia and Central Asia and domestic gas was also consumed. Even so, China hit the record volume of LNG import despite a delay in economic recovery. If China's LNG import further rises, this would surely become a factor to raise the market.

In addition, natural gas supply from Russia to Europe deceased by an equivalent to 100mil mt of LNG after Russia's invasion of Ukraine. In the midst of limited supply room of gas, prices surged in 2023 caused by external factors such as labor strikes in Australia and a deterioration in the Middle East situation. The fragile market situation is forecast to continue in 2024. "Supply room might recover to the level before the invasion of Ukraine around 2026. Qatari LNG project would be expanded and new LNG projects would start up in North America. These would eventually compensate for the loss of supply from Russia by 2028, which would make supply/demand return to the original situation," said Mr Shirakawa.