Asian spot liquefied natural gas (LNG) prices have surged to a four-month high this week, driven by fears of supply disruptions stemming from the ongoing conflict between Israel and Iran. Current average prices for LNG delivery into north-east Asia have reached $14.00 per million British thermal units (mmBtu), up 11% from $12.60/mmBtu the previous week.
This marks the highest price seen since February 21, as sources in the industry report. The escalation began last Friday when Israel launched attacks on Iran, citing concerns that Tehran was nearing the development of nuclear weapons.
In response, Iran has retaliated with missile and drone strikes on Israeli targets. Toby Copson, chairman at Davenport Energy Partners, mentioned that the price increase reflects growing concerns over potential supply disruptions in the Middle East, as the conflict continues to evolve.
He pointed out that while immediate demand in Asia is low, some buyers may still bid for cargoes in anticipation of future tightening in supply. According to Alex Froley, a senior LNG analyst at ICIS, Chinese demand was approximately 12% lower in June compared to the same period last year.
He noted that while geopolitical factors will likely contribute to market volatility, stable physical supplies could ultimately lead to a calming of the market. So far, no significant disruptions to LNG cargoes have been reported, although QatarEnergy has advised tankers to remain outside the Strait of Hormuz until right before loading.
Looking at broader market trends, Europe experienced some fluctuations as gas prices at the Dutch TTF hub eased after reaching an 11-week high. Meanwhile, LNG freight rates in the Atlantic have seen their largest weekly increase since October 2023, with rates now at $49,750 per day, while Pacific rates remain unchanged at $32,000 per day.
The situation continues to evolve, and the implications for the energy market remain significant.