Asian LNG Prices Surge Past $30 as Middle East Shipping Risks Escalate

Liquefied natural gas (LNG) prices on the Asian spot market surged past $30 per million British thermal units (mmBtu) for the first time since December 2022, according to Bloomberg. The price increase comes in the wake of reports of an LNG tanker attack in the Gulf of Aden and the Red Sea. An LNG carrier faced an attack in the Red Sea from a small boat, which crew members fired warning shots back at the attackers.

UK Maritime Trade Operations reported the incident, suggesting a potential return to normal energy flows out of the Middle East may not be forthcoming. LNG prices have been trading above $25 per mmBtu for about a month as demand for the fuel grows ahead of the winter heating season. Both Asia and Europe are competing to secure as much gas as possible for the winter, regardless of prices.

Despite the Red Sea attack, a tanker carrying LNG from Qatar continued its journey to Poland on Monday, as QatarEnergy aims to fulfill its long-term supply deal with Poland's Orlen. However, the threat of attacks on tankers may discourage stronger flows of Middle Eastern LNG to Europe. As Qatari gas becomes scarcer in Asia due to the price jump, demand is declining, while European storage sites are only 74% full, compared to a five-year seasonal average of around 89% at this time of year.

With Asia's demand for LNG potentially dampened further, some nations may turn to coal, which is not an option for Europe, as most EU member states have already shut down their coal power plants as part of their decarbonization efforts, leaving them no choice but to pay any price for LNG.