HIGHLIGHTS
- Japan’s liquefied natural gas inventories have fallen to a seven-month low.
- Local heavy snowfall in the past few weeks has caused a sharp increase in electricity demand across Japan, which has led to the loss of LNG inventories.
- LNG shipments, especially those exported from US projects, have recently been diverted from Asia to Europe to take advantage of more attractive prices.
FULL ARTICLE
Japan’s liquefied natural gas inventories have fallen to a seven-month low. Supply held by power utilities fell 6.9% from the previous week to 2 million tons on Jan. 16, the lowest since the end of May, according to data from Japan’s trade ministry released on Wednesday.
Due to the influence of an atmospheric pressure trough, local heavy snowfall in the past few weeks has caused a sharp increase in electricity demand across Japan, which has led to the loss of LNG inventories. Over the past four years, Japan’s LNG inventories have dropped by an average of 2% between late December and January. However, inventory this year has seen a sharp decline of about 14% compared to the end of December.
Besides, LNG shipments, especially those exported from US projects, have recently been diverted from Asia to Europe to take advantage of more attractive prices. This leads to a decrease in supply for Asian importers and available goods are being sold at sky-high prices.
At the same time, Japan’s utilities have been sitting on the sidelines of the LNG spot market as Europe has been outbidding the region to attract shipments. Japan has received 10% fewer LNG deliveries in the one-month period through Jan. 17 compared to last year, according to ship-tracking data compiled by Bloomberg.
However, inventories were still well above the four-year seasonal average of 1.67 million tonnes. While Japan will likely be able to avoid a natural gas shortage, especially with the end of winter within sight, a sustained blast of frigid weather may still force utilities to return to the LNG spot market or reduce output from gas-fired power plants.
Minh Ngo
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