Freezing temperatures across Asia and Europe are driving liquefied natural gas (LNG) prices to record highs and push up the cost of delivering the fuel across the globe as buyers go -investment in tight investments and shortage of tankers.
Demand for ultra-cold natural gas has risen in recent years as buyers, particularly China and India, move away from more polluted coal-fired power plants. Prices had remained relatively low until the end of 2019, when cold weather caused unexpected and loads of bottles to raise prices.
Asian LNG Spot prices are up more than 1,000% from hitting a record low of under $ 2 per mmBtu in May at lockdown to halt the spread of the virus. U.S. natural gas prices hit a six-week high Tuesday, while the cost of exporting LNG from the United States to Asia hit a full-time record, partly due to a logjam in the Panama Canal, where vessels from the Gulf of the USA to the Pacific Ocean.
“This bottle for shipping has an immediate impact on gas demand. Storage supply is low so demand is high, ”said Toby Dunipace, with the SSY wreck in a report this week. He said the congestion of the Panama Canal had led to waiting times of seven to 10 days or more for LNG vessels.
The effects are also being felt in U.S. markets, where U.S. natural gas prices hit a six-week high Tuesday.
Global LNG trade has set high levels every year since 2015. Global LNG demand jumped about 10% per year from 2017-2019 mainly due to strong growth in China and India.
Analysts at Goldman Sachs said 10 U.S. shipments were halted for February. Limited LNG tanker access may keep LNG prices up in the coming months, traders said.
Average daily tanker rates on the U.S. Gulf route to Japan rose to $ 253,270 Tuesday, the highest level since earnings were first published in 2019, Baltic Trade data showed.
S&P Global Platts ’Japan-Korea-Marker (JKM), a reference point for Asian LNG spot prices, rose to $ 28.221 per million British thermal units (mmBtu) on Monday for cargo delivery in February. At least one Japanese facility paid more than $ 30 per mmBtu for cargo for delivery at the end of January, traders said.
On Tuesday, commodity trader Trafigura bought a 3.2 trillion British thermal unit (TBtu) cargo for delivery in mid-February from Total Gas and Power Asia at $ 39.30 per mmBtu, data from Platts showed.
This is worth nearly $ 130 million, about 11% more cargo for 2 million barrels of oil, based on current prices, Reuters calculations show.
High Asian LNG prices have pushed the entire natural gas complex higher. Dutch gas prices traded at the TTF hub, the European benchmark, rose to nearly a three-year high on Tuesday as LNG shipments were brought back to Asia and speculative purchases going to size.
On Tuesday, the price of TTF last month hit 28.55 euros per megawatt hour, or around $ 7.8 / mmBtu, the highest since the fourth quarter of 2018.
“Supply is very tight in the fast months and inventory rates are very low in many places,” said Singapore-based LNG trader. “As the climate warms and supply gradually returns, the situation may improve.”
If the cold weather eases, prices may be near a peak as demand for heating fuels declines, traders and analysts said.
Temperatures are expected to rise to above average in Tokyo, Beijing, Seoul and Shanghai over the next few weeks, weather data from Refinitiv Eikon showed.
Supply also appears to be on the rise with Shell resuming shipments from the Prelude floating facility in Australia after being offline for nearly a year, and with increased shipments from Qatar, Russia and the United States. United, data showed a move from Eikon.
However, supply issues will cause the LNG market to remain vulnerable to cold snaps during the first quarter, Goldman Sachs said.