The premium on LNG cargoes delivered into the Asia Pacific market compared with Southwest Europe is down 63 cents/MMBtu, or roughly 19%, since early January on steady demand in the Atlantic Basin from South American buyers.
Recent buy tenders from South America include Argentina's bid for two cargoes, one delivered into Bahia Blanca in early May and a second delivered into Escobar mid-month, market sources said.
Brazil, meanwhile, was recently heard buying reloads from Spain for April lifting with continued interest for May.
As the market settles into the current shoulder season, the mild winter in Europe and Asia along with growing supplies from Angola and Australia's Northwest Shelf, and unexpected Spanish reload availability, have all combined to depress prices, which are down an average 22% globally since early February. Still, steady demand from South America has kept values in the Atlantic Basin relatively strong, eroding the Asia Pacific premium over Southwest Europe during the last several months.
While Argentina continues to rely on an ever-increasing percentage of LNG and onshore gas imports for power generation, demand from Brazil has remained strong as the nation moves to keep reservoir levels high ahead of the World Cup in June and July. Hydroelectric power accounts for 66% of Brazil's total domestic power generation, according to the most recent data from Brazil's Ministry of Mines and Energy.
Amid steady demand from South America, the Southwest Europe Marker recently moved to a $2.68/MMBtu discount to the Japan-Korea Marker, according to Platts data. The premium on Asia Pacific prices over Europe reached a high early this year at $3.31/MMBtu.
On Tuesday, the JKM for May was assessed at $15.60/MMBtu, down from an annual high in February at $20.20/MMBtu. Europe, meanwhile, was pegged at a $2.69/MMBtu discount to the JKM with Southwest Europe assessed at $12.91/MMBtu, off from the February high at $17.18/MMBtu.
