Asia’s Liquefied Natural Gas Prices Hit the Brakes

HONG KONG—Prices for liquefied natural gas have sunk to a seven-year low in Asia as demand has failed to keep up with rising supply from countries such as the U.S. and Australia.

The average spot price in Asia for LNG for delivery in May dropped by 42.5% year-over-year to $4.241 per million British thermal units, the lowest monthly average since July 2009, according to price reporting agency Platts. In the U.S., benchmark natural gas closed last week at $2.14 per MMBTU, down 15.5% from a year ago.

LNG is natural gas that is cooled to a liquid form so it can be transported by ship. Prices have recently come under intense pressure in Asia, which makes up 70% of global demand, thanks to a gusher of new supply.

Major oil and gas companies have been reluctant to cut output for fear of losing their market share, even if that means selling their products at a discount. Companies also can’t afford to curtail production at facilities now coming on stream that have taken years and billions of dollars of investment to start up.

In February, Houston-based Cheniere Energy Inc. dispatched a shipment of LNG to India, making it the first batch of U.S. shale gas to be delivered to Asia. Analysts have said they expect the U.S. to become a major exporter of gas into global markets in the next few years.