Drop in JKM-TTF spreads for bal-winter JKM seems ‘overdone’
LNG price spreads between the Japan Korea Market (JKM) and the Dutch Title Transfer Facility (TTF) for balance of winter 2024/25 contracts have fallen, but analysts find this drop is "overdone". London-based Energy Aspects forecasts the JKM-TTF spread will rise above US shipping differentials via the Panama Canal, openig the arbitrage for US spot cargoes to head to Asia.
Spreads narrowed to $0.53/MMBtu in recent days, down from around $1.13/MMBtu in mid-September – with little fundamental change. Though freight rates have fallen, key US shipping differentials via the Panama Canal have delinked only by an average $0.18/MMBtu month-on-month.
Energy Aspects hence upholds its bullish view on bal-winter outturn JKM prices, mainly due to their bullish views on TTF winter 2024–25 prices due to rising geopolitical tensions in the Middle East and systematic buying at the TTF near-curve.
The likely end of Russian gas transits through Ukraine starting from January 2025 and Europe’s rising gas demand in an average winter may lead to supply constraints in the EU, which in turn propel up fuel prices. “Our base case outturn JKM price forecasts average $14.55/MMBtu, $0.85/MMBtu above the latest CME settlements,” they explain.
LNG buyers worldwide have launched tenders for 22 cargoes so far this month, with eight of these confirmed, against 10 cargoes tendered and confirmed last October. Of the 80 cargoes tendered in September, 53 were confirmed and 40 were bought by Asian companies.
“Japan has bought three spot cargoes via tender issued month-to-date, with two December deliveries and one January delivery,” analysts disclosed. LNG stocks held by major Japanese power utilities, a subset of aggregate LNG stocks, reached 2.02 million tons, up from a multi-month low of 1.63 Mt two weeks ago.
Indian buyers continue to issue buy tenders, which analysts believe is “likely to stock up pre-emptively before power demand increases in late October due to Diwali.” Indian LNG inventories are understood to be quite high currently.
China’s Sinopec, meanwhile, secured a December delivery via tender, after about a year of not purchasing any cargoes through tenders. Chinese LNG stocks at ten selected LNG terminals have reached 1.93 Mt, up by 0.33 Mt year-on-year.
