Extreme Asian heat is fuelling demand for liquefied natural gas (LNG) in the region amid record imports in South Asia, Reuters reports.
This could lead to a reduction in available supply and a further rise in spot prices in Asia. They have already risen by a third since April as heat waves in South and Southeast Asia stimulate the use of air conditioners and demand for other cooling.
Prices are now at a near six-month peak of more than $12 per million British thermal units (mmBtu). They were expected to remain elevated amid extreme Asian heat, Siamak Adibi, principal consultant at energy consultancy FGE, informed.
Spot prices are now driven by Asian demand. Temperatures in South Asia are rising due to a heatwave, increasing power demand.
While China may still see weaker demand compared to its record supply in 2021, demand from India and the rest of Asia offset any drop, Adibi added.
Parts of South and Southeast Asia experienced extreme heat and record-breaking temperatures in April and May, increasing electricity use for cooling and overloading power supplies. In India, at least 15 people died of suspected heatstroke in the eastern states of Bihar and Odisha on Thursday.
LNG imports from South Asia rose nearly 20 per cent to 3.8 million metric tons in May compared to a year earlier, according to analyst firm Kpler. India, meanwhile, saw its highest ever imports at 2.4 million metric tonnes. In Bangladesh, LNG volumes also reached a monthly record of 0.6 million tonnes.
New importers, the Philippines and Vietnam, started supplying LNG last year. They also increased their purchases. Vietnam received three cargoes in April and May for power generation, while buyers in the Philippines so far delivered nine cargoes compared to 11 for the whole of last year.
Growing demand
The growing demand for cooling will continue as summer in Northeast Asia is just beginning. Japan’s meteorological agency forecast that temperatures are likely to be above average between June and August.
Meanwhile, China’s energy regulator warned that power supply would be tight in some regions in the next few months amid rising consumption. Energy Aspects analyst Min Na stated that demand for LNG replenishment in Asia would be higher this summer compared to last year.
Various weather forecasts suggest Northeast Asia may experience hotter-than-normal weather from May. We forecast a total restocking demand of 2.4 million tons this summer across Japan, South Korea and Taiwan, up by 2.3 million tons year-on-year and 0.1 million tons above the five-year average.
Japanese government data showed that LNG stocks by utilities stood at 2.06 million tonnes as of May 26. This is below the five-year average for the period as Tokyo is already experiencing hot weather.
South Korean power company Korea Midland Power Co (KOMIPO), Thailand’s state-owned power company PTT, Philippines power producer First Gen, and Bangladesh’s state-owned Rupantarita Prakritik Gas Co Ltd (RPGCL) also announced tenders for LNG supply in July.
