Demand for liquefied natural gas (LNG) in the world's top importer of the fuel, Japan, is set to take additional hit this month as the country ordered the closure?
Demand for liquefied natural gas (LNG) in the world's top importer of the fuel, Japan, is set to take additional hit this month as the country ordered the closure of all schools from March 2 until late in the month, and as corporations ask staff to work from home amid the coronavirus outbreak.
Japan is currently the number-one importer of LNG and its electricity demand is expected to drop, and power demand accounts for most of the country's LNG demand, analysts told Bloomberg on Monday.
The coronavirus outbreak is dealing a heavy blow to the three biggest import markets of the super-chilled fuel?Japan, China, and South Korea. The world's top three importers of LNG are also the three hardest hit countries in the coronavirus outbreak.
The demand slowdown amid the outbreak comes on top of a milder winter in North Asia and high LNG inventories across Asia this season. All these factors have sent LNG prices to multi-year lows. ?
Last month, China National Offshore Oil Corporation (CNOOC), the country's largest LNG importer, was said to have declared?force majeure on deliveries of LNG?cargoes and will not be honoring some of the deliveries because of the deadly coronavirus outbreak.
Even before Chinese importers started invoking force majeure on LNG deliveries, LNG prices?had hit a decade low due to warmer winter weather in many parts of Asia, booming new LNG supply?especially from the U.S. and Australia?and slower import growth in China.
Average LNG spot prices for April delivery were around $3 per million British thermal units (MMBtu) last week, stable on the previous week, but traders are concerned that demand would further slump in coming weeks, traders told Reuters.
Although super-low LNG prices could encourage some demand, the seasonal high inventories in Asia and China's shaky LNG demand leave ?no other markets big enough or sophisticated enough to absorb a lot of LNG quickly,? Simon Flowers, Chairman and Chief Analyst at Wood Mackenzie, said last month.?
?Asia's other big markets, like Japan and South Korea, will see only limited coal to gas switching in power due to rigid market structures, existing inflexible LNG contracts and regulated pricing,? he added. ??
By Tsvetana Paraskova for Oilprice.com
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