Asia Braces for LNG Price Surge as Russia Cuts Some Supply to EU
Asia Braces for LNG Price Surge as Russia Cuts Some Supply to EU
(Bloomberg) -- Liquefied natural gas importers in Asia are bracing for higher spot prices as Russia’s move to cut some supply to Europe is poised to further tighten the global market.
Moscow is cutting off gas to Poland and Bulgaria, making good on a threat to halt flows to countries that refuse President Vladimir Putin’s new demand to pay for the fuel in rubles. The escalation of the standoff between Russia and the European Union over energy supplies is sending prices on the continent surging.
North Asia LNG spot rates are expected to also rise on fears that Europe will move to procure a dwindling amount of available cargoes, traders said. Some Asian LNG buyers pinged suppliers late Tuesday night to preliminarily check how many shipments are available, traders said, requesting anonymity to discuss private details.
Russia’s invasion of Ukraine is exacerbating a global energy crisis, sending LNG and coal prices to record highs and boosting inflation fears. Europe is already pulling most of the spare LNG supply from the U.S. and other nearby exporters.
To be sure, Asia isn’t yet rushing to snatch spot LNG, and any immediate surge in prices will likely be sentiment-driven. China’s stringent Covid-19 restrictions are curbing demand from the world’s biggest importer, while buyers in Japan and South Korea have been reluctant to procure more shipments due to high prices, traders said.
Also, Europe’s LNG import terminals are operating near maximum capacity, which may limit how much more spot supply the region’s utilities can buy, the traders added.
The EU has rejected the move to pay for gas in rubles in principle but now payment deadlines are starting to fall due. Governments across Europe need to decide whether to accept Putin’s terms or lose crucial supplies, and face the prospect of energy rationing.
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