Global LNG-Asian LNG prices weaker on ebbing demand

Fri Jan 20, 2012 6:59am EST

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* Ample inventories pressure prices lower

* Weaker prices seen in spring

* Japan nuclear situation still uncertain

By Rebekah Kebede

PERTH, Jan 20 (Reuters) - Asian liquefied natural gas spot prices dropped lower for the seventh straight week to just above $15 per million British thermal units (mmBtu) LNG-AS due to low demand from well-stocked buyers in North Asia.

The world's top two LNG buyers, Japan and South Korea, had stocked up well ahead of the winter and prices may even dip further as spring approaches, according to market sources.

"Moving out of winter, prices will probably go down a little, but not much," said one market source, who expected prices to remain slip to the $14 to $15 per mmBtu range as spring approaches.

South Korea's current LNG inventory stands at 80 percent of the country's storage capacity of 3.8 million tonnes, down from over 90 percent of capacity as of mid-December.

Japan, whose gas utilisation reached record levels in December as its 10 utilities tried to compensate for nuclear outages in the aftermath of last year's Fukushima crisis, also has plentiful supply.

Prices have fallen from highs near $18 seen late last year, a level which some in the industry said was artificially inflated in anticipation of growing demand from Japan after the tsunami in March knocked out some nuclear facilities as well as coal plants.

Japan currently will have just three nuclear reactors online out of a total of 54 by the end of the month, after the shutdown of a reactor at Chogoku Electric Power's Shimane nuclear plant on Jan. 27 for planned maintenance.

The dwindling number of nuclear reactors still operating in Japan could be a supportive factor, but some industry analysts say the Japanese utilities have planned conservatively and have enough contracts lined up to cover their needs.

"All the utilities were prepared... most of the utilities have their medium terms deals in place," the source said.

For a table of Japan's nuclear plant operations, click

US GAS PRICES SEEN RISING

In the United States, government analysts reported this week that exporting surplus U.S. natural gas could boost U.S. gas prices, which are at their lowest levels in a decade due to a boom in unconventional gas production.

U.S. gas futures slipped under $2.50 per mmBtu on Friday, a fraction of Asian LNG prices and about $6 per mmBtu lower than British benchmark prices. <0#NG-NGLNM=R>

The report released Thursday said exporting U.S. gas could add as much 9 percent a year to prices of the fuel for consumers and industry over the next two decades.

Asian customers have been keen to buy cheap U.S. gas exports and any curtailing of those export plans due to concerns that it could raise domestic prices may .

State-run GAIL (India) Ltd said this week it is in talks to buy LNG Macquarie Energy, which has a share in the U.S.-based Freeport LNG project.

GAIL has already signed up for some U.S. exports through Cheniere Energy <LNG.A >, which has sold nearly all its capacity for its first U.S. export plant and has already proposed a second plant. (Editing by Keiron Henderson)

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