Liquefied natural prices on the Asia spot market surged to the highest in three years after QatarEnergy suspended production following Iranian strikes on its LNG facilities.
According to traders quoted by Bloomberg, spot prices jumped twofold on last week, reaching $35.40 per million British thermal units. They could go further still, if Qatar LNG production remains suspended. QatarEnergy is the single biggest producer of liquefied gas, with its capacity representing 20% of the global total.
Earlier in the week, before QatarEnergy announced the suspension of LNG production, Goldman Sachs analysts predicted that if tanker traffic disruption in the Dtrait of Hormuz continues for a month, Asian LNG prices could rise to $25 per mmBtu, which would be a 130% increase from prices at the time. The surge is already higher than that predicted price level.
QatarEnergy said in a statement Monday it was suspending production “due to military attacks on QatarEnergy’s operating facilities in Ras Laffan Industrial City and Mesaieed Industrial City and Mesaieed Industry City.”
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Immediately after the news broke, European natural gas prices surged by 40%, followed by another 30% increase on Tuesday and are likely to continue climbing today, especially after the news of a Russian LNG tankers bursting into flames in the Mediterranean on Tuesday. Information is scarce but some have suggested it may have become the target of a drone attack.
QatarEnergy has not given a timeframe for the restart of LNG production but it seems that it would take more than a couple of days—a lot more. This is bad news for all LNG buyers despite the availability of U.S. LNG. There is simply not enough of it to cover the supply gap fast enough to neutralize price surges. The news is especially bad for Asian buyers, who represent 80% of QatarEnergy’s client base.
By Irina Slav for Oilprice.com
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