LNG surges to six-year high with cold snap in importing nations

Bloomberg

Liquefied natural gas has made a dramatic rebound from a pandemic-induced demand collapse, and the rally in the heating and power-plant fuel could extend into next year.
The onset of colder weather in key importing nations, outages at major production hubs and congestion along global shipping routes have combined to push spot prices in Asia this week to the highest level since 2014, a more than sixfold jump from a record low in April.
Most of those factors are seen persisting into the early weeks of 2021, adding to upward pressure for prompt cargoes. That’s a potential boost for commodity houses that are shifting more resources to trading the fuel and are typically more exposed to spot prices than oil-linked rates.
“It’s going to take three to four weeks before the cavalry arrives with enough supply from Nigeria, and the US, so if you’re a buyer with immediate needs, it’s going to be costly,” said Ira Joseph, head of gas
and power analytics at S&P Global Platts.
The Japan-Korea Marker, the benchmark for spot deals in Asia, rose to $12.40 per million British thermal units, according to Platts, which assesses the price. Prices have risen 81% in the past month and are up 564% since bottoming out on April 28.
Demand for LNG is expected to grow faster than for any other fossil fuel, according to the International Energy Agency. China, India and emerging Asian markets will account for most of the future growth in imports, the agency forecasts.
The recent run-up in prices could spill over onto end-users, said Peter Lee, a senior oil and gas analyst at Fitch Solutions.
Some utilities may favour cheaper alternatives such as coal in the short term, especially in South and Southeast Asia, where environmental policies are more lax, he said.
Pain from rising costs won’t be felt evenly across buyers because most LNG is still sold on long-term contracts linked to oil, said Fauziah Marzuki, a BloombergNEF analyst.