Asia's LNG imports hit record, but supply surge keeps price muted

(Reuters) - Asia's imports of LNG rose to a record in December, but spot prices remained subdued as shipments from top exporters Australia and the United States also hit all-time highs.

Asia, the top buyer of the super-chilled fuel, saw imports reach 26.61 million metric tons in December, according to data compiled by commodity analysts Kpler.

This was up from November's 23.35 million tons and also eclipsed the previous high of 26.15 million from January 2021, according to Kpler.

The rebound in imports was driven largely by China, which reclaimed its title as the world's largest LNG buyer in 2023 from Japan.

China's imports surged to 8.22 million tons in December, up from 6.97 million in November and the highest since January 2021, according to Kpler.

Asia's other heavyweight importers also saw gains, with Japan landing 6.78 million tons, up from November's 5.40 million and the most since January 2023, while South Korea's December imports were 5.10 million, up from 4.19 million in November and the highest since February 2021.

The robust demand did little to spark a rally in prices, with the weekly spot index <LNG-AS> slipping to $11.70 per million British thermal units (mmBtu) in the seven days to Dec. 29, down from $11.90 previously and the lowest since August.

The spot price dropped 58.2% over 2023 as demand for cargoes eased after a surge in 2022 led by Europe's efforts to replace Russian pipeline natural gas in the wake of Moscow's invasion of Ukraine in February 2022.

Europe's LNG imports also rose in December, hitting 11.80 million tons, up from November's 10.81 million and the highest since April last year, according to Kpler.

While demand increased in December, it had been soft in the preceding months as mild winter weather in both Asia and Europe, as well as plentiful inventories, limited demand for spot cargoes.

The strength in demand for LNG in Asia in December was matched by strong export performances from the world's three biggest LNG suppliers.

The United States, which overtook Australia as the world's biggest exporter of LNG in 2023, shipped out 8.56 million tons in December, up from 7.51 million in November and the highest monthly total on record, according to Kpler data.

AUSTRALIA, QATAR

Australia also had a record December, with Kpler data showing exports at 7.26 million tons, up from 6.61 million in November and eclipsing the previous monthly all-time high of 7.18 million from June 2022.

Qatar also saw robust exports in December, with shipments of 7.11 million tons, up from 6.36 million in November and the most since the 7.40 million from January 2023.

In effect, the rise in demand in December was matched by increasing supply.

What this does is raise questions about the outlook for the spot price once the winter peak demand period passes.

If supply remains steady, it points to prices having to decline in order to tempt more buyers into the market.

A retreat in the spot price below $10 per mmBtu may lead to countries such as India, Pakistan and Bangladesh buying cargoes.

India's LNG imports dropped to 1.86 million tons in December, from 1.99 million in November, although they were up from 1.32 million in December 2022.

India is viewed as a price-sensitive buyer and it's worth noting that when the South Asia nation's imports were at their highest, in early and mid-2020, the spot price was languishing at record lows, slumping to $1.85 per mmBtu in early May of that year.

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