Japan LNG buyers stock up after sharp inventory drawdown
By Emily Chow
SINGAPORE, April 11 (Reuters) -Japanese buyers of liquefied natural gas (LNG) are replenishing inventories after higher power demand during a cold March led to a sharp drawdown in stocks, and ahead of the annual spike in electricity usage to beat the summer heat.
LNG stockpiles held by major utilities in Japan, the largest importer after China, fell to 1.48 million metric tons on March 31, according to Ministry of Economy, Trade and Industry data, 36% lower than the 2.33 million tons a year earlier and about a third below the five-year average from 2018-2022.
JERA, Japan's biggest utility and its top buyer of the super-chilled fuel, stocked up on several LNG cargoes for deliveries in April and May, while other importers also issued buy tenders, industry sources said.
JERA did not immediately respond to a request for comment.
"There was a flurry of Japanese buying for April-May delivery and some have also asked for June-July in the past few weeks," said Joachim Moxon, senior LNG analyst at ICIS.
Three or four power utilities that are restocking inventories are also opting for spot purchases over term supply volumes now that spot prices have eased, said Rystad Energy senior analyst Masanori Odaka, adding that some utilities are issuing tenders to stock up for June ahead of summer.
Asian spot LNG prices LNG-AS have eased 18% since the start of the year and are currently down a quarter from early April last year. For some importers, spot prices are lower than their oil-linked long-term contract prices.
LNG stocks are also still below last year's 2.5-3 million ton levels in June, the beginning of Japan's summer season.
"We expect Japanese LNG demand to rise by 1.1 million tons, or 4%, year-on-year over summer due to energy demand normalisation," said Min Na, head of Asia LNG at Energy Aspects, referring to the April to September period.
Last year, the Japanese government called on households and industries around Tokyo to save electricity in July and August to ensure stable power supply during the peak summer season.
Risk of further delays to restarting the Shimane unit 2 and Onagawa unit 2 nuclear power plants, expected in August and September respectively, could also boost LNG demand, Na said, noting that both had seen multiple delays.
"For each month these two units are delayed, Japanese LNG demand would be boosted by around two LNG cargoes," Na said.
Reporting by Emily Chow; editing by Miral Fahmy
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
