Extreme Asian heat spurs LNG demand ahead of summer months
5/31/2024
Extreme temperatures across Asia are driving up liquefied natural gas (LNG) demand in the region as importers seek cargoes ahead of summer, with imports in South Asia hitting records.
This could tighten available supply and further lift Asian spot prices that have already gained a third since April, with heatwaves across South and Southeast Asia boosting air-conditioner use and other cooling demand. Prices are now at a near six-month peak at $12 per million British thermal units (MMBtu) and are expected to remain elevated.
"Spot prices are now driven by Asian demand. Temperatures in South Asia are rising due to a heatwave, increasing power demand," said Siamak Adibi, principal consultant at energy consultancy FGE.
While China may still see lower demand compared with its record breaking shipments in 2021, demand from India and the rest of Asia has compensated for any drop-off, Adibi said. Parts of South and Southeast Asia saw extreme heat and record temperatures in April and May, increasing electricity consumption for cooling and straining power supplies.
South Asian LNG imports rose nearly 20% from a year earlier to 3.8 MMt in May, according to analytics firm Kpler. India saw its highest import levels ever for May at 2.4 MMt, while Bangladesh LNG volumes hit an all-time monthly record at 600,000 t, according to Kpler data.
New importers the Philippines and Vietnam, which started taking LNG shipments last year, have also bumped up their purchases. Vietnam received three cargoes in April and May for power generation, while buyers in the Philippines shipped nine cargoes so far this year versus 11 for all of last year.
Rising demand for cooling is set to continue as Northeast Asia enters its summer. Japan's meteorological agency forecast likely higher-than-average temperatures from June to August, and China's energy regulator warned power supply will be tight in some regions the next few months amid growing consumption. "Various weather forecasts suggest Northeast Asia may experience hotter-than-normal weather from May," said Energy Aspects analyst Min Na in a note, adding that restocking demand for LNG in Asia will be higher year-on-year this summer.
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