Liquefied natural gas (LNG) prices in the spot market are rising sharply, making it increasingly difficult for Asian countries to buy the fuel. Europe, however, is continuing to purchase LNG at elevated prices as it seeks to build up stocks ahead of winter.
According to commodity-market analytics firm Kpler, Asia is expected to receive around 20 million tonnes of LNG in September, down from about 22 million tonnes in the same month last year and the previous month. Reuters, citing Kpler data, put the September estimate at 20.09 million tonnes, the lowest level for the month in eight years.
Europe is moving in the opposite direction as it prepares for the winter heating season. Kpler estimates that Europe will import about 7.98 million tonnes of LNG in September, while October arrivals could reach 10.53 million tonnes.
The disruption in the Strait of Hormuz, along with the suspension of Qatar’s LNG supplies, has tightened the global market. Qatar is a major LNG supplier, and shipping disruptions through the strategic waterway have restricted deliveries to both Asia and Europe. QatarEnergy has also extended cancellations of some LNG deliveries as the disruption continues.
Asian spot LNG prices have risen by around 150% since February, reaching about $26 per million British thermal units in mid-September, according to market data cited by Reuters. The price surge has discouraged buyers in several Asian markets, particularly China, India and Pakistan.
Europe is facing additional pressure because its gas storage levels remain below the five-year average ahead of winter. Kpler said European buyers have been increasing LNG procurement to ensure adequate storage before the traditional withdrawal season begins.
Europe faced a similar situation in 2022, after Russia launched its invasion of Ukraine and concerns over gas supplies prompted European companies to aggressively purchase gas ahead of winter. Demand subsequently weakened and prices fell, causing losses for some companies. The current situation is different, however, because Russian pipeline gas supplies are also constrained by sanctions.
China is responding differently to the LNG price surge. Instead of relying heavily on spot-market purchases, Beijing is increasing its use of long-term contracts. China is also receiving gas from Russia while seeking alternatives to make up for the impact of Qatar’s disrupted LNG supplies.
Countries that cannot afford LNG at current prices are increasingly turning to coal as an alternative fuel. Reuters has reported that high LNG prices and supply disruptions have already pushed some Asian countries to shift toward coal and oil.
The disruption to LNG supplies from Qatar and the United Arab Emirates has placed India, Pakistan and Bangladesh among the countries facing significant pressure from the tighter regional supply situation. Recent Kpler analysis has also identified Bangladesh replacement buying as a factor supporting Asian LNG demand.
