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. In India on Thursday, at least 15 people died of suspected heatstroke in the eastern states of Bihar and Odisha.
South Asian LNG imports rose nearly 20% from a year earlier to 3.8 million metric tons in May, according to analytics firm Kpler. India saw its highest import levels ever for May at 2.4 million tons, while Bangladesh LNG volumes hit an all-time monthly record at 0.6 million tons, 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.
"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."
Japan government data showed LNG stockpiles by utilities at 2.06 million tons as of May 26, below the five-year average for the period, as Tokyo is already experiencing hot weather.
South Korean power generation company Korea Midland Power Co (KOMIPO), Thailand state-energy firm PTT, Philippines power producer First Gen and Bangladesh's state-owned Rupantarita Prakritik Gas Co Ltd (RPGCL) have all also issued tenders seeking LNG for delivery in July. LNG/TEND
(Reuters - Reporting by Emily Chow, with additional reporting by Katya Golubkova and Yuka Obayashi; Editing by Tom Hogue)