Europe and Asia compete for liquefied natural gas cargoes due to Gulf crisis
The US-Iran conflict disrupting shipments in the Gulf has driven Europe and Asia into competition for the same LNG cargoes, while prices have more than doubled.
Disruptions in liquefied natural gas shipments from the Gulf region due to conflicts between the US and Iran have pushed Europe and Asia into fierce competition for the same cargoes as the winter season approaches. Prices have more than doubled since the beginning of the war.
Impact of the Gulf crisis on markets
The war between the US and Iran has caused severe disruptions in liquefied natural gas shipments from the Gulf region. This has complicated Europe's efforts to fill its storage facilities, driving the world's two largest buying regions to chase the same cargoes. Prices have more than doubled since the start of the war, reaching multi-year peaks.
Europe and Asia competition
Menelaos Ydreos, Secretary General of the International Gas Union, stated that futures markets reflect expectations that the conflict will be prolonged. Europe has started to outbid Asia for LNG cargoes due to the need to refill its storage facilities. In September, the Asian benchmark price stood at 30 dollars, while the delivery price to Europe was at 24.62 dollars.
High price thresholds and forecasts
Buyers in Asia are now preparing to pay more rather than withdraw from the market in the face of high prices. The fact that countries like Pakistan and Bangladeş are purchasing high-priced cargoes demonstrates this shift in attitude, and it is projected that prices could reach 35 dollars during the winter months if the disruptions in the Strait of Hormuz persist.
Supply losses and new bans
Despite a supply loss of 36 million tons originating from the Gulf, it is stated that the net loss this year may remain limited to around 5 million tons thanks to new capacity increases. On the other hand, Europe's plan to ban Russian LNG starting in January deepens the uncertainty and supply pressure in the market.
Shift in supply routes
The disruption of Gulf supplies has driven buyers towards alternative sources ranging from West Africa to Indonesia. While Thailand, Bangladesh, and other countries are engaging with different regions, new producer countries like East Timor and Tanzania are also planning for future projects.
Trend of escaping the spot market
Rising spot prices have started to drive Asian buyers toward long-term LNG agreements. While new capacities expected to come online in the coming years keep long-term contract prices relatively stable, buyers are trying to protect themselves against price volatility.