The price of spot cargoes of liquefied natural gas (LNG) has ticked up recently in Asia amid tentative signs of some peak summer demand, but the problem remains that for many buyers the cost is still too high.
While the market focuses on the spot price as a way of assessing the extent of oversupply, or the strength of demand, it’s worth noting that the market for short-term cargoes is dwarfed by the far greater volumes procured under long-term, mainly crude oil-linked contracts.
This means that for many consumers of LNG, especially in the top- and third-ranked buyers Japan and South Korea, the decline in spot prices is largely irrelevant.
For weak spot prices to become relevant, demand in those countries has to be so strong that additional cargoes over and above contracted volumes are needed. Read More
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