Asian LNG Prices Surge Amid Middle East Tensions

Asian LNG prices spiked to their highest since early January over the weekend in the wake of Israel's response to Iran's action amid fears that the conflict will widen. The North Asian spot rate exceeded $11/million Btu on Tuesday from $8/million Btu at the end of February, a 40% jump. 

In the same way, another LNG competitor Europe also experienced a similar rise. Traders are shying away from short positions while they weigh up the possible escalation of tensions in the Middle East, which has bullish effect on the price movement.

In addition to the prices that have been boosted, half the volume of US LNG export facility gas flow has been cut last week due to maintenance, therefore, supply to Asia is limited. Japanese importers also are attempting to supplement the shortage by purchasing more gas. However, LNG prices in Asia and Europe have rebounded since February's bottoms, but the sustainability of the recovery is in doubt, as high costs put off emerging Asian nations, especially those price-sensitive. 

The most serious situation, which is the closure of the Strait of Hormuz by Iran, could result in the disruption of about 20% of global LNG trade, leaving prices at more than $100 per million BTU, which could be regarded as absolutely unparalleled as per Rystad Energy.