Spot prices of liquefied natural gas (LNG) in Asia have staged an impressive rally over the past two months and have now soared 18 times from April 2020 lows—and the surge is obliterating even the recent rally in Bitcoin prices, according to Bloomberg.
A perfect storm of unusually cold winter in north Asia, outages at major LNG exporters, and logistical and shipping constraints had driven the price of Asia’s LNG benchmark, the Japan-Korea Marker, to the highest on record, at $21.45 per million British thermal units (MMBtu) on Friday.
This week, the price shot further up to over $30/MMBtu to a new high since the assessment of the benchmark began in 2009.
LNG cargoes on the spot market have recently gone for six-figure sums. According to Bloomberg, ExxonMobil sold last week a cargo to Japan for a record $130 million, while Total sold an LNG cargo to commodity trader Trafigura for $126 million.
The record-high prices are not expected to last long, as cargoes for March delivery on the spot market are already half the price of those for February delivery. Nevertheless, the combination of several factors caught the market by surprise in late 2020 and early 2021, with LNG exporters on the spot market and the LNG tanker owners raking in insane profits.
At the start of 2021, a cold snap in Asia and Western Europe continued to drive natural gas and LNG prices higher, while unplanned supply issues at major exporters, including Qatar, Australia, Norway, and Malaysia, are also driving LNG prices higher.
In Spain, home of one of Europe’s biggest terminals, LNG prices also surged amid an unusual cold snap in the country, which brought a rare snowfall in Madrid.
Shell has recently restarted the production of LNG at its Prelude offshore project in Australia after almost a year’s suspension. The restart of the 3.6-million-ton facility comes at the best possible time. The cold spell in Asia has pushed LNG prices through the roof, erasing worry about an oversupplied market as Chinese buyers struggle to stock up on the fuel.
One would think that it would be a boost for our export of LNG, and our prices would also be going up as well. Don't see that happening yet.
Not enough shipping capacity to make a dent.