Russia’s latest move to cut gas supplies to Europe is intensifying global competition for sea freight shipments of the fuel, raising the risk of price spikes and shortages from Asia to South America.
Utilities in South Korea and Japan are speeding up plans to buy more cargoes of liquefied natural gas (LNG) for the winter on fears that Europe will also blow its supply, according to traders familiar with the matter and who cites the Bloomberg agency. Even some price-sensitive buyers in countries such as India and Thailand are scrambling to procure cargoes to avoid future shortages, they said.
Russia’s Gazprom said on Monday it will cut flows through the Nord Stream pipeline to Europe again this week, forcing European buyers to look to alternatives such as LNG. Spot prices of the supercooled fuel, already trading at seasonal highs, are at risk of rising further as buyers in Europe and Asia move to win cargoes off each other, raising their bids.
Traders estimate LNG prices in North Asia will rise to around $45 per million British thermal units on Tuesday, the highest since early March, shortly after Russia’s invasion of Ukraine. There is a contraction in available LNG during this winter amid supply disruptions from export facilities in Australia and the US.
Natural gas is a key fuel for power generation and heating, and the price rally threatens higher inflation around the world. At this price level, buyers in some emerging countries – such as Pakistan, Bangladesh and Argentina – cannot afford spot loads of the fuel while struggling with power shortages.
South Korea is currently working to secure LNG cargoes from the spot market due to broader supply concerns due to geopolitical uncertainties, South Korea’s Energy Ministry said. Any potential power outages in the country could force more spot purchases, according to Korea Gas Corp.
China – the world’s top LNG importer last year – has remained on the sidelines of the spot market due to restrictions imposed by the coronavirus outbreak, which have curbed demand for the fuel. If economic activity in China picks up, that could quickly change and lead to fewer LNG shipments to Europe, Samantha Dart, head of gas research at Goldman Sachs, told Bloomberg Television last week.
Source: Capital
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