East Asia’s Warmer Winter Outlook Dampens LNG Demand Expectations in 2024

The Asia LNG spot price for February was around $11.87 per MMBtu as of 27 December, little changed from $11.75 per MMBtu on 19 December.

Tracking the TTF prices, there was also an increase in the Asia LNG spot price in the latter half of last week due to news of transport disruptions in the Red Sea, however the increase has been marginal.

East Asian utilities are well-stocked, despite a spate of cold weather in the region during December.

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This has resulted in relatively weak demand during most of December and is likely to also bring weaker January demand as warmer weather is expected throughout East Asia from January onwards. China, South Korea, and Japan have all transitioned out of a phase of cold temperatures to warmer-than-normal temperatures.

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In China, the weather has already turned warmer than normal. Beijing, which had temperatures that were 11°C below seasonal norms a week ago, is now expecting temperatures of 7°C above seasonal norms by the turn of the year.

Cold winds are expected to increase in frequency, which may bring temperatures back to normal, but given the low intensity of the winds, warmer-than-normal temperatures are still expected for the next two weeks.

In South Korea, temperatures have risen to warmer than normal and are expected to remain so until 8 January.

According to the Korean Meteorological Administration (KMA), temperatures are then expected to fall from 8 January to 14 January with a 40% probability of below-normal temperatures, and a 40% probability of normal temperatures.

The Japanese LNG scene

From 15 January to 28 January, there is a 40% probability of above-normal temperatures and a 40% probability on normal temperatures, indicating a temperature increase that would curb LNG demand.

The Japan Meteorological Agency (JMA) is expecting warm temperatures throughout Japan until 12 January, with a minimum 60% probability of warmer-than-normal temperatures across all prefectures other than Hokkaido.

A warmer-than-normal winter is expected until March, with a minimum 50% probability of higher-than-normal temperatures expected across the entire country.

Japan utility LNG inventories were reported to be 2.49 million tonnes (Mt) as of 24 December. This is slightly less than the 2.53 Mt recorded at year-end 2022, but is higher than the five-year average of 2.06 Mt for end-December from 2018 to 2022.

Most of East Asia transitioning to warmer-than-normal temperatures amid higher storage levels is likely to keep demand suppressed.