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Natural Gas in Asia Suffers a Decade Low Due to Excess Supply

Natural gas in Asia is moving towards the lowest price in a decade, probably extending twinge for global oil majors suffering from the fuel’s weakness.

The latest bad news for bulls got here this week, as China National Offshore Oil purchased a liquefied pure gas cargo for early September supply to China at about $3.90/MMBtu, according to traders with data of the transaction. The area’s benchmark value, the LNG Japan/Korea Marker, briefly touched $4/MMBtu in April 2016 but hasn’t dropped under that since 2009.

The LNG market has been swamped by the startup of projects in Australia and the U.S., whereas mild weather throughout North Asia cuts consumption. Slumping costs mean global oil majors together with Total SA and Eni, which noticed weak gas hurting profits last quarter, could not but be in the clear.

The slump might also add pressure on sellers fielding requests by customers to rework long-term offers linked to oil, which now will be over twice as costly as spot ranges. Analysts at Credit Suisse Group have signaled a present dispute between Japan’s Osaka Gas and an ExxonMobil-led enterprise as a possible “bellwether” across the market.

The JKM marker was assessed at $4.11/MMBtu on Tuesday, in comparison with $9.88/MMBtu a year ago, based on S&P Global Platts. The intraday Platts assessment for a cargo delivered to North Asia within the first half of September was $4/MMBtu on Wednesday, down $0.12.5 from the previous day.

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