(July 16): Asian liquefied natural gas (LNG) prices rose to the highest since late March, as fresh hostilities in the Middle East deepened concerns that shipping through the key Strait of Hormuz will remain disrupted for longer.
Spot LNG traded at about US$20.2 per million British thermal units, according to traders, after surging about 10% over the past week.
The conflict has intensified in recent days as the US and Iran feud over control of the strait, a key conduit for about a fifth of global LNG supply. The US carried out more strikes on Iran to pressure Tehran to stop attacking vessels and reopen the Strait of Hormuz. Iran’s Islamic Revolutionary Guard Corps said Wednesday that the passage will stay shut until the US ends its strikes and the blockade of Iranian ports.
Renewed tensions have already pushed Asian buyers to seek more cargoes. Pakistan purchased its most expensive spot shipment in four years at around US$20.70/mmbtu, according to traders, as a planned delivery from Qatar was cancelled due to Hormuz disruptions. Other countries including India, Thailand and Bangladesh have also recently issued tenders for supplies.
Ship movements have slowed to a near standstill since the US resumed its naval blockade of Iran after a wave of attacks on commercial vessels, although a handful of them have still made the crossing. A prolonged disruption would keep LNG supplies tight, particularly for Asia, where buyers rely heavily on Qatari cargoes. Spot LNG is now trading at roughly twice its pre-war level.
See also: Oil holds gains as attacks on ships near Hormuz threaten supply
“For Asian buyers, this further delays the hopeful return of Qatari volumes,” Evan Tan, an LNG analyst from ICIS, said. “Assuming geopolitical tensions continue into the next couple of months, a storage-short Europe and firm Asian demand will have both regions bidding up spot prices through later parts of the year,” he added.
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