The spot prices of liquefied natural gas (LNG) in Asia jumped to a record-high of $59.672 per million British thermal units (MMBtu) on Thursday, as the market panics over natural gas supplies following Russia’s invasion of Ukraine.
The price of spot LNG, the Japan-Korea-Marker (JKM) benchmark for the region, as assessed by S&P Global Platts, soared this week to beat the previous record of $56.326/MMBtu set in October 2021. Back then, the market was tight ahead of the winter in the northern hemisphere, with Europe and Asia experiencing energy crises.
Now the winter is nearly over, but the Russian war in Ukraine has begun, spreading panic on all commodity markets that there would be disruption of energy supplies.
In addition, traders are avoiding Russian LNG, just like they are steering clear of Russian crude.
According to vessel-tracking data from Refinitiv Eikon cited by Reuters earlier this week, several LNG tankers from Yamal LNG in Russia have switched status to “For Orders” in the past days, from previously signaling France and the UK as destinations.
Currently, Europe is a strong pull for LNG cargoes, with prices there also rallying amid concerns that Russian pipeline gas supply could be disrupted or cut off any day now.
The European benchmark natural gas price surged on Thursday morning to hit a new record-high for a second consecutive day, trading at the equivalent of $360 per barrel oil, as concerns over the disruption of Russian gas supply mount.
The market is increasingly apprehensive about a potential disruption to natural gas supply—be it additional sanctions targeting Russia’s energy, a possible Russian retaliation to sanctions by halting pipeline supply, or a direct hit on a pipeline carrying gas from Russia via Ukraine.
Meanwhile, the EU is drafting plans to reduce its dependence on Russian gas, while the International Energy Agency (IEA) said on Thursday that the
European Union could reduce its reliance on Russian natural gas by more than one-third within a year by turning to other suppliers and using other energy sources.
By Tsvetana Paraskova for Oilprice.com