Gas Prices Surge in Europe and Asia Amid Market Tensions

Liquefied natural gas (LNG) prices in Asia have skyrocketed by 40% since late February, reaching their peak for the year at over $400 per thousand cubic meters. This surge has prompted many LNG suppliers without long-term contracts to prioritize the Asian market, with shipments primarily directed towards Japan, South Korea, and China.

The price hike is fueled by the tense situation in the Middle East and resulting logistical challenges. Analysts from Rystad Energy warn that further escalation of conflicts, particularly if Iran were to close the Strait of Hormuz—through which about 20% of global LNG trade, notably from Qatar, passes—could push gas prices beyond $3,600 per thousand cubic meters, nearing records seen in 2022. However, the likelihood of such a scenario remains low for now.

For Russia, the spike in global gas prices presents a favorable scenario. Domestic gas tariffs are not linked to global prices, and Russia predominantly exports LNG. Moreover, with rising prices, projects like the Power of Siberia-2 gas pipeline, which currently lacks supply contracts with China, become more appealing for export.

In contrast, Europe reacts to the surge in Asian prices. Gas prices in Europe are now around $350 per thousand cubic meters, one and a half to two times higher than in February-March, according to Alexey Grivach, deputy head of the National Energy Security Fund.

While the rise in Asian prices does influence European quotes, it’s primarily driven by concerns over escalating Middle East conflicts, notes Ivan Timonin, project manager at Implementa. Currently, the market isn’t facing a shortage, making it unlikely for Europe and Asia to engage in a struggle for available gas volumes.

Looking ahead, the market’s trajectory will depend significantly on the introduction of new LNG production capacities in the coming years.

Российская газета


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