Asia’s spot LNG prices fell on Thursday from the three-year high hit on Wednesday after U.S. President Donald Trump pledged the United States would “immediately” provide “political risk insurance and guarantees” for tankers transiting the Strait of Hormuz.
President Trump also noted that the U.S. Navy would escort energy tankers in the region if needed.
Although the plan has yet to come to fruition, spot LNG prices in Asia retreated slightly on Thursday from the $25.40 per million British thermal units (MMBtu)—a three-year high, hit on Wednesday.
The Asian spot LNG price slipped to $23.80 per MMBtu on Thursday, traders told Bloomberg.
Despite the pullback, the price has now more than doubled from last week before the war started and before Qatar, the world’s second-largest LNG exporter, halted LNG production.
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QatarEnergy on Wednesday also declared force majeure to its affected buyers as tankers are not passing through the Strait of Hormuz right now.
LNG shipments from Qatar and the United Arab Emirates (UAE), which jointly account for about 20% of global LNG supply, are now off the market, after QatarEnergy announced a pause to LNG production at its Ras Laffan hub and no tankers pass through the Strait.
As traffic via the Strait of Hormuz is effectively closed, the LNG supply shock to Asia is immediate, with Europe feeling the secondary effects of 20% of global LNG supply offline.
As a result, both Asia’s spot LNG prices and Europe’s TTF benchmark gas prices have soared in recent days to multi-year highs.
A total of 85% of Qatar’s LNG exports go to Asia, so the immediate physical supply crunch is skewed toward Asia, says Florence Yu, Associate LNG Market Analyst at Vortexa.
“China, India, and Taiwan are among the importers most exposed to this risk,” Yu added.
India, one of the most price-sensitive LNG buyers in Asia, is opting for lowering gas supply to industrial customers, rather than buying LNG at the current elevated prices.
By Tsvetana Paraskova for Oilprice.com
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