2024-04-18 22:56:31
The price of liquefied natural gas in Asia jumped to its highest level since early January amid concern that Israel’s response to the attack carried out by Iran earlier this week could turn into a broader conflict.
The price during spot trading in North Asia exceeded $11 per million British thermal units yesterday, Tuesday, and has risen approximately 40% since the end of February, according to traders. This followed similar gains in Europe, which competes with Asia for LNG purchases. Traders are currently closing short selling positions in gas, as they assess the possibility of a broader escalation in the Middle East, which could raise prices further.
The rise in gas prices was also partly due to gas flows to US LNG export facilities falling by a quarter over the past week due to maintenance work, which could limit the flow of supplies to Asia. Japanese importers are also looking to buy more gas.
Worst case scenario for gas markets
Gas prices in Asia and Europe have rebounded after falling to the lowest level since 2021 in February, due to high inventory and mild winter weather. However, the rally may lose momentum, as the rising cost of LNG is expected to dampen demand from price-sensitive emerging nations in Asia.
Risks escalate in the Middle East after the Iranian attack on Israel
The worst-case scenario for an escalation of hostilities in the Middle East is Iran closing the Strait of Hormuz, a major sea lane through which 20% of total liquefied natural gas trade passes.
Although this is unlikely, any disruption in the Strait could raise prices to more than $100 per million British thermal units, the highest level ever, according to Rystad Energy forecasts.
Lu Ming Pang, an analyst at Rystad, said in a research note that the market has not yet taken into account the risk of a broader conflict in the Middle East, while assessing any potential impact on gas shipments to demand centers in Europe and Asia.
Last updated: April 17, 2024 – 22:24
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2024-04-18 22:56:31