European LNG prices surge to highest level since 2023

{"text":[[{"start":8.52,"text":"The price of liquefied natural gas in north-west Europe surged to its highest level in more than three years, as the continent braces for tight winter supply as a result of the Middle East conflict."}],[{"start":19.86,"text":"Buyers were paying $22.83 for 1mn British thermal units at the start of this week, more than double the price a year ago and the highest since January 2023, according to Argus Media. Prices on Tuesday dipped marginally to $22.23."}],[{"start":36.82,"text":"Disruption to flows through the Strait of Hormuz, which ordinarily handles around a fifth of the world’s LNG supplies, has sent prices surging since the start of the Iran war earlier this year."}],[{"start":null,"text":"

"}],[{"start":47.12,"text":"Gas markets have been affected even more than oil, which has also risen this year, because shipping crude is simpler and does not require such complex and expensive vessels. Some crude shipments have left the Gulf in recent months, albeit far below prewar levels."}],[{"start":61.78,"text":"In contrast, only eight LNG carriers exited the strait in July, according to data compiled by Kpler, compared with around three per day before the war."}],[{"start":71.28,"text":"Shipments could be curtailed further after Iran’s Persian Gulf Strait Authority threatened dozens of ships with fines or confiscation on Sunday. The list of 46 blacklisted vessels included 10 LNG carriers."}],[{"start":83.44,"text":"Gas traders are losing confidence that shipments through the narrow waterway will restart soon, said Martin Senior, head of LNG pricing at Argus."}],[{"start":92.08,"text":"While all LNG importers have been hit by the reduced flows out of the Middle East, Europe was in a particularly vulnerable position as gas inventories were at lower levels than usual before the war began."}],[{"start":103.52,"text":"In the first few months of the conflict, Europe managed its needs by reducing the amount of gas it injected into storage, but this has meant its facilities have restocked at a slower pace than usual."}],[{"start":114.4,"text":"Net injections in Europe averaged 3 terawatt hours per day in August, down from 3.6 TWh a year ago, according to Gas Infrastructure Europe data."}],[{"start":123.92,"text":"Analysts have warned for several months that gas storage levels are too low. Meanwhile, gas futures prices for the coming months have stayed broadly flat, giving traders little incentive to stock up now and then sell later in the winter when demand is higher."}],[{"start":137.6,"text":"Under more normal circumstances, traders buy gas during the low-demand season, pay to store it and then sell it for a profit in the winter."}],[{"start":145.86,"text":"As a result, European buyers are now competing with Asia for supplies, pushing up prices there too. Platts JKM, the Asian LNG benchmark, gained 13 per cent in August, hitting $24.08 per MMBtu on Tuesday, just shy of its wartime peak of $25.41."}],[{"start":165.42,"text":"Gas traders are closely watching European policymakers for any sign that they may intervene in the market. German storage is 50 per cent full and the law obliges the government to buy and store gas if private companies do not use their booked storage capacity."}],[{"start":null,"text":""}],[{"start":180.14,"text":"In the meantime, analysts warn prices may rise further."}],[{"start":183.76,"text":"Asian buyers reduced their imports early in the conflict, helping to tamp down global prices, but benchmark European gas prices would need to rise above €100 a megawatt hour to “more significantly discourage Asian LNG demand”, said Goldman Sachs in a note on Sunday. Contracts were trading at around €66 per MWh on Tuesday."}],[{"start":204,"text":"China, Asia’s biggest LNG importer, has demonstrated less willingness to compete with Europe for cargoes in response to tight global supplies this year than it did in 2022 following Russia’s invasion of Ukraine."}],[{"start":216.72,"text":"However, the region’s other buyers are showing more willingness to pay higher prices than in the past. There has been “sustained demand above $20 per MMBtu from typically price-sensitive countries in South and South-East Asia”, said Argus’ Senior."}],[{"start":217.22,"text":"Data visualisation by Martin Stabe"}],[{"start":236.26,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1787705262_8277.mp3"}