"Persisting heatwaves across Asia are driving up gas demand, particularly in Japan and South Korea.

This summer, Japan has seen higher power prices due to ongoing heat and maintenance at three nuclear plants, with two expected to last until the end of August.

Meanwhile, European gas prices are falling, and the US maintains robust gas production and supply to LNG terminals."

Asian spot liquefied natural gas (LNG) prices for October, the new trading month, traded around $14.4 per million British thermal units (MMBtu) on 20 August, while derivatives for November traded 2.6% lower week-on-week at around $14.2 on the same day.

In Europe, the Title Transfer Facility (TTF) for September traded at around $12.4 per MMBtu on 20 August, down 3.9% from last week.

An ongoing heatwave in Asia is likely to keep gas consumption in the region strong, while the risk of price volatility remains due to geopolitical tensions in Europe and the Middle East.

Persisting heatwave in Asia strengthens gas demand

Australia Pacific LNG had a brief downtime on 20 August to replace a valve at Train 2, according to the Australian Energy Market Operator.

US major Chevron completed maintenance work at Australia’s Gorgon LNG Train 2, ending the maintenance ahead of schedule on 10 August compared to the original planned maintenance period of 12 July to 19 August. Meanwhile, production from trains 7 and 8 at Malaysian state operator Petronas’s LNG complex in Bintulu in Sarawak, East Malaysia remained reduced.

The Japan Meteorological Agency forecasts a 70% to 80% probability of above-average temperatures until 30 August, and the Korea Meteorological Administration forecasts a 60% probability of above-average temperatures until 1 September.

Forecasts in China also point to above-average temperatures until 2 September.

Japanese LNG importer Jera purchased an unknown volume of spot LNG for September delivery due to ongoing heatwaves in the country.

Jera’s 243-megawatt (MW) Shin-Nagoya gas-fired power plant unit 7-5 is also facing downtime from 20 August to 24 August, due to turbine equipment maintenance.

Jera’s Anegasaki gas-fired power plant New Unit 1, which has a nameplate capacity of 646.9 MW, also faced a brief outage on 19 August but resumed operations on the same day.

Meanwhile, the 300-MW gas-fired power plant unit 5 of Kashima-Kyodo, owned 50% each by Jera and Nippon Steel, had an unplanned outage from 16 August to 19 August to adjust fuel consumption.

In the Japanese power market, day-ahead power prices bounced back following a week of the traditional ‘Obon’ holiday season in Japan, which saw factories throughout the country shut down operations.

Day-ahead power prices ranged from JPY 17 to JPY 21 ($0.12 to $0.14) per kilowatt-hour (kWh) for the week as of 21 August, approximately 31% higher compared to the previous week.

Additionally, power prices in Japan have been higher this summer compared to last year, due to an ongoing heatwave and planned maintenance at two nuclear power plants, which is expected to last until the end of August.

While some prefectures in Japan – such as Shimonita in Gunma prefecture and Date city in Hokkaido – are facing power outages following a typhoon, any decline in Japan’s gas consumption is likely to remain limited due to the region’s power mix and high temperatures in other parts of Japan.

On 21 August, major power utilities in Japan reported combined LNG storage levels of 1.92 million tonnes (Mt) for 18 August, down 3% week-on-week, and 5% lower than the five-year average of 2.02 Mt for the end of August from 2019 to 2023. This was, however, at a higher level compared to the combined storage level of 1.72 Mt at the end of August last year.

Elsewhere, Thailand’s PTT was seeking two LNG cargoes for end of August and end of September delivery via a tender closing on 21 August, following a previous tender for delivery between 15 October and 16 October that closed on 15 August. Indian Oil Corporation (IOC) was also seeking three cargoes for mid-September to early October delivery, while Indian state-owned Gail was seeking two October delivery cargoes.

Kuwait Petroleum Corporation (KPC) was also seeking a cargo for 14 October to 30 November delivery.

European gas prices fall

LNG for October delivery to Northwest Europe traded at $12.4 per MMBtu on 20 August, 3.9 % lower compared to 16 August, the first date for October delivery pricing.

Total pipeline flows from Norway into Europe were down 1.4% week-on-week to around 324 million cubic meters per day (MMcmd) on 20 August. Meanwhile, gas pipeline flows from Russia to Europe were up 3.7% week-on-week to about 93.1 MMcmd as of 18 August, but were lower than the gas pipeline flows of 95.4 MMcmd on 18 August 2023.

However, underground storage held by European Union (EU) countries was at around 90%, slightly lower than the 92% in the same period of 2023.

The end-date for France’s Montoir LNG import terminal’s maintenance has also been delayed again to 23 August.

Healthy gas production and supply to LNG terminals in US

The front-month Henry Hub gas price increased 2.3% week-on-week to $2.2 per MMBtu on 20 August.

Weather forecasts in the South Central and Mountain regions point to above-average temperatures for the remainder of August, while temperatures in the Midwest are expected to rise to above-average levels from 23 August.

Feedgas level to LNG projects averaged around 12.9 billion cubic feet per day (Bcfd) for 14 August to 20 August, which was marginally higher than the previous week.

Feedgas supply to Sabine Pass LNG recovered to around 4.4 Bcfd on 19 August, some 17% higher compared to a week ago, as feedgas levels for 12 August to 14 August were down by approximately 10% to 15%.

Similarly, feedgas levels to Freeport LNG stabilized at around 2 Bcfd this week, after dipping to 1.7 Bcfd on 14 August.

In South America, the LNG Endurance LNG carrier is scheduled to discharge a cargo at Brazil’s Sao Paulo regasification terminal on 28 August.

Long-term LNG contract volumes and sufficient water storage levels for hydropower generation is likely going to keep spot LNG demand from Brazil muted, although other terminals in the country will continue receiving small volumes in the coming months from long-term contracts.

The demand from neighboring countries Argentina and Columbia could also decline as the winter ends in the Southern Hemisphere.