Asia LNG spot price surges by 40% to record high

SINGAPORE: Asia liquefied natural gas (LNG) spot prices surged by 40% to a record high of over $56 per million British thermal units (mmBtu) on Wednesday, amid a global energy crunch, low gas inventories and mounting supply concerns.

Price agency S&P Global Platts' Japan-Korea-Marker (JKM), which is widely used as a spot benchmark in the region, climbed to $56.326 per mmBtu on Wednesday for a cargo delivered into North Asia in November, recording the largest single-day price increase of $16.65 from Tuesday, its data showed.

This works out to roughly over $320 per barrel of oil equivalent. Brent crude oil futures is currently trading at about $81 per barrel.

Prices for spot LNG cargoes delivered in December rose to above $57 per mmbtu, according to the data.

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"Surging European gas prices exerting upward pressure on Asia-pacific LNG cargo prices as trading houses and portfolio majors raised bids to attract volumes into Asia," said Kenneth Foo, head of Asia LNG Pricing at S&P Global Platts.

Foo added that other reasons behind the increase included fresh concerns in Asia over production issues at the Sakhalin 2 LNG project in Russia and some maintenance works ongoing for one train at Indonesia's Tangguh project.

Asian LNG prices followed an earlier rally by Dutch and British wholesale gas prices amid forecasts of lower wind and cooler weather.

By Asia market's Wednesday close at 16:30 Singapore time (0830 GMT), the Dutch wholesale gas price for December delivery jumped over 40% to 159.50 euros per megawatt hour.

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The price rally comes at a time when the winter season is just starting in the northern hemisphere and as gas demand for heating is expected to go up, especially from top LNG buyers, China and Japan.

Temperatures in Seoul, Beijing and Shanghai are expected to dip below average over the next 45 days, weather data from Refinitiv Eikon showed.

After hitting fresh highs in the morning, Dutch and British wholesale gas prices fell on Wednesday afternoon in a highly volatile market, partially on profit-taking amid concerns of regulatory intervention from the European Commission and comments from Russian President Vladimir Putin that Russia is shipping more gas, he added.