Jan 2020

Trend of Natural Gas and LNG Prices

Short-term trend

  • Since 23 October 2019, assessed spot LNG prices (JKM) in Northeast Asia have been at the lowest level at this time of the year for a decade (effectively the lowest ever). JKM for February 2020 delivery, during its front-month period from the middle of December 2019 to the middle of January 2020, declined from the middle of USD 5s per million Btu to the low of USD 5s, followed by the low of USD 4s for March delivery as of the middle of January, as the market sentiment is further soften for March. Japan and China have largely completed procurement for their winter gas demand and do not have much appetite for additional spot cargo demand despite lower spot LNG prices. The tension between the United States and Iran has have little impact on JKM. Based on data from the latest Trade Statistics, Japan's average LNG import price in December 2019 was USD 9.48 (USD 0.01 higher than in November), while the METI spot LNG price was USD 6.7 in December 2019 (USD 1.2 higher than in November). Japan’s average LNG import price for the 2019 calendar year was similar to that for 2018 at USD 10.00.
  • While the Henry Hub price in the United States went down by USD 0.09 in December 2019 to USD 2.19 at the end of the month, the lowest for ten years at this time of the year, responding to the higher average temperature than normal in the Lower 48 and the continued growth of natural gas production in the country. Meanwhile the NBP price in the United Kingdom in December 2019 declined by USD 1.33 to USD 4.18 equivalent at the end of the month. In addition to continuous inflow of LNG and high inventory in natural gas storage in Europe, the renewal of gas transit agreements between Russia and Ukraine has removed concern over gas supply disruption. While the previous paragraph described low Asian spot LNG prices, European spot gas prices have declined even faster, widening the gap between them and potentially creating incentives to divert spot LNG cargoes to Asia.
  • Japan's average LNG import price of USD 9.48 in December 2019 was 1.6 times as high as the assessed spot LNG price in the region (JKM) for delivery in December (assessed between mid-October and mid-November) at USD 6.08. The gap between the two stayed above 2 times for four straight months from July to October delivery and was the highest ever followed by lower but still high levels after that. The average landed prices of LNG to Japan from the United States and Russia in December were USD 9.09 and USD 9.31 respectively to undercut the overall average of USD 9.48. Japan's LNG import in 2019 amounted to 77.33 million tonnes, down by 7% from 2018 and lower than 2011.

LNG and Spot Gas Prices, 2019-2020

Mid- to long-term trend

  • During the five-year period from 2014 to 2019, Japan's average LNG import price fell from the middle USD 16 to USD 17 per million Btu range, largely due to the downward trend in crude oil prices, to which long-term contract LNG prices are pegged. Except in August 2019, when it rose to USD 10.13, the average price has since April 2019 largely stayed below USD 10.
  • JKM declined from around USD 10 per million Btu for January in 2019 delivery to the middle of USD 4 to USD 5 range for July - October 2019 delivery. After JKM for delivery from November 2019 to January 2020 briefly stayed at around USD 6, JKM declined gradually to the low of USD 4s for March 2020 delivery. This is a historically remarkable decline to also a historically low level. JKM, which in recent years moved in the range between European spot gas prices at the lower end and crude oil equivalent at the higher end, stayed near the lower end in 2019. In addition, since June 2019 the JKM has largely been at historic lows.
  • Japan's average LNG import price was 1.6 - 2 times higher than the average JKM for delivery in each month in the second quarter of the year (assessed between one-and-half and half-a-month prior to delivery), and was more than two times higher than the JKM from July to October, representing the largest relative gap between the two since 2011. This seems to be due to ongoing massive LNG supply capacity expansions, and weaker appetite for LNG in Asia, particularly from the traditional three LNG markets in Northeast Asia - Japan, Korea and Chinese Taipei. Even in China, growth of LNG import has been moderated from more than 40% in 2017 and 2018 to 13% in the first eleven months of 2019, on annualised basis.

LNG and Spot Gas Prices, 2015-2020

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Henry Hub price: NYMEX Futures and Options, CME Group
NBP price: ICE Futures Europe, Intercontinental Exchange
TTF price: ICE Futures Europe, Intercontinental Exchange
JKM: LNG Japan/Korea Marker© 2020 by S&P Global Platts, a division of S&P Global Inc.
METI spot price: Spot LNG Price Statistics, Ministry of Economy, Trade and Industry
Japan’s average LNG import price: Trade Statistics of Japan

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Trend of Natural Gas and LNG Inventories


  • Japan's LNG inventory as of the end of September 2019 stood at 4.26 million tonnes, an increase of 3.3% from the preceding month and a decrease by 3.4% from one year earlier. Because of a 5.1% decrease in monthly LNG consumption for city-gas supply in September 2019, the LNG inventory for city-gas supply in the month was 2.41 million tonnes, 20.3% higher than August 2019 and 14.8% higher than September 2018. The LNG inventory for gas-fired power generation in September 2019 decreased by 12.7% from August 2019 and 19.9% lower than September 2018, although LNG consumption for power generation decreased by 8.5% month-on-month in September 2019. This was largely because LNG import for power generation in September 2019 was 4.1 million tonnes, lower by 150,000 tonnes or 3.5% month-on-month.
  • Japan's LNG inventory levels have been generally high relative to the country's LNG consumption levels, as the country is almost entirely dependent on imported LNG for its natural gas supply. In Europe and the United States, there are many underground gas storage facilities, LNG inventory levels are relatively low compared to Japan. Assuming that LNG cargoes heading to Japan are counted on, additional 1.5 million tonnes should be added to the inventory volumes.
  • Moreover, more than 60% of LNG is used by electric power companies, who also have different sources of power production and use LNG more or less as backup sources to adjust gaps or surplus of their total power generation. In recent years, operational performances of the country's nuclear power reactors, as well as increasing power supply from renewable energy sources, have dramatically changed the operation of LNG inventories. This is why the total inventory level at the end of November 2018 reached almost 5 million tonnes.

Japan end of month LNG inventory, 2014-2019

Japan end of month LNG inventory, 2018-2019

Compiled based on data from Gas Business and Thermal Power Generation Statistics, Ministry of Economy, Trade and Industry.

United States

  • According to data from the U.S. Energy Information Administration (EIA), working gas in underground natural gas storage in the United States was 3,192 Bcf at the end of December 2019, a 11.1% decrease in one month. Reflecting yet steady increase in natural gas production in 2019, stocks were 487 Bcf higher than one year earlier and almost the same as the five-year average (of 3,230 Bcf).
  • Underground natural gas storage facilities in the country generally inject more gas in summer starting in April and send out more gas in winter starting in November. Those trends have been created by the need to use more gas in heating in winter and by commercial motivations to buy gas cheap in lower demand periods between April and October and sell at higher prices in winter peak demand periods. Those trends have in recent years, however, to some extent been moderated by increasing use of natural gas in power generation, particularly in summer peak periods, increasing LNG exports, and increasing gas exports by pipeline to Mexico, with the inventory peak declining in 2017 and 2018. In 2019, LNG storage volumes have increased as growth in domestic gas production has offset increasing consumption and exports.
  • According to data from EIA, storage stocks began the 2018 and 2019 injection seasons from April at relatively low levels of 1,335 Bcf and 1,155 Bcf, respectively. In 2018, operators replenished inventories at a lower-than-normal rate during the injection season, because of record-high power demand during the summer. As a result, total storage stocks for the end of November 2018 reached only 2,991 Bcf - the lowest since 2002. However, in 2019, reflecting steadily increasing natural gas production, stocks have recovered to the past-five-year average level at 3,591 Bcf as of the end of November and at 3,192 Bcf as of the end of year.
  • During the 5 years from 2014 to 2019, no new natural gas storage facilities began operating.

U.S. Natural Gas Underground Storage, 2015-2020

U.S. Natural Gas Underground Storage(Jan 2019-Jan 2020)

Compiled based on data from the U.S. Energy Information Administration (EIA)


  • The stored volume of natural gas in European underground storage facilities operated by the Aggregated Gas Storage Inventory (AGSI +) member companies of the European Union (EU) as of the end of 2019 was 979 TWh or 6.2% lower than the previous month, reflecting the winter gas demand. But the level was still 218 TWh or 28.6% higher than one year earlier, and 252 TWh higher than the five-year average. The stored volume represented 88% of the working capacity, coming down from 97.6% on 4 November, the highest occupancy ever in the history of the storage statistics, still staying significantly higher than the past five-year range of 65% - 75% at the time of the year.
  • The largest contributors to the increase of stored volumes include the growing imports of LNG into the European region starting in the third quarter of 2018 and a rather slow increase of winter gas demand. The ongoing global expansion of LNG production capacity, combined with slowing demand growth in traditional LNG markets in Northeast Asia, resulted in 1.7 times larger LNG delivery into Europe in 2019 than in 2018, notably from increasing LNG volumes from the United States and Russia. It is thought that operators, who want to buy gas cheap in off-peak periods and sell it high in high-demand winter months, are using those storage facilities.
  • During the slightly longer than five-year period from the end of August 2014 to the end of November 2019, the gas storage capacity of AGSI in Europe increased by 16% from 954 TWh to 1,109 TWh as of the beginning of 2020.
  • Those storage facilities generally inject more gas in summer starting in April and send out more gas in winter starting in November, with storage levels going up to 80% or more than 90% of the working capacity at the end of injection period. Storage levels go down to 20% - 30% at the end of the withdrawal period.
  • However, in recent couple of years, fluctuations in stored volumes have increased partly because of extreme weather conditions as well as commercial motivations of shippers of those gas storage facilities. The extreme winter cold of early part of 2018 drove down the total storage level to 18% at the end of March that year. The flood of LNG volumes imported into the region starting from the latter half of 2018 has increased volumes in gas storage in summer and autumn 2019, to nearly full capacity. The occupancy rate continues to be high even the region has entered into the winter withdrawal season.

European Natural Gas Storage, 2015-2020

European Natural Gas Storage, Jan 2019-Jan 2020

Compiled based on data from Gas Infrastructure Europe, Aggregated Gas Storage Inventory (AGSI). The 5-year range and average figures in the graphs do not mean the full 5 years storage amount because only data since January of 2011 is available.