Spot prices of liquefied natural gas in Asia have surged by 10% in the past week to the highest level since March, as the re-escalation in the Middle East and the fresh near-halt to shipping through the Strait of Hormuz rekindled fears of supply in the world’s biggest LNG-importing region.
On Thursday, spot LNG prices in Asia hit $20.2 per million British thermal units, traders told Bloomberg.
Prices have jumped by 10% since last week, when the hostilities returned in the Middle East and the U.S.-Iran ceasefire appears close to collapsing.
The renewed near-closure of the Strait of Hormuz delays the recovery of Qatar’s LNG shipments.
Qatar, the world’s second-largest LNG exporter before the war, had just seen volumes recovering as of the end of June, before the latest flare-up abruptly ended the rebound in Qatari shipments through the Strait of Hormuz.
Europe’s benchmark natural gas prices have also jumped this week, following the escalation over the Strait of Hormuz, which disrupted LNG shipments out of the Middle East again.
The renewed disruption of Qatar’s LNG exports could tighten the global market just as Europe is scrambling for supply to refill gas storage sites ahead of the next winter.
Europe’s gas market remains exposed to the gas price volatility in the refilling season, which could prove more difficult and much more expensive to complete ahead of the next winter, as Asia now attracts the bulk of spot LNG supply due to the spike in spot Asian LNG prices.
“There’s increased competition between Europe and Asia for spot LNG cargoes. Recent heatwaves across parts of Europe and Asia only add to concerns,” ING’s commodities strategists Warren Patterson and Ewa Manthey wrote in a note early on Thursday.
“EU gas storage is just 53% full vs a 5-year average of 68%, and some distance from the EU’s minimum target ahead of 75% going into the heating season.”
By Charles Kennedy for Oilprice.com
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