Asian spot LNG prices have surged to $17.80 per million Btu, an increase of $1.30 week-on-week, marking a near four-month high. This rise is primarily attributed to renewed uncertainty surrounding transit through the Strait of Hormuz amid US-Iran tensions. European natural gas prices also saw a significant jump of $2.55 week-on-week, reaching $17.00/MMBtu. These price increases reflect concerns about the disruption of LNG supplies from the Gulf, especially from Qatar and the UAE, which are major exporters through the Strait.
The conflict in the Middle East has had a substantial impact on LNG supplies, with deliveries from Qatar and the UAE falling by 35 billion cubic meters between March and June compared to the same period last year. For the full year, combined LNG supplies from these two nations are forecast to decline by approximately 45%, or 55 billion cubic meters. This reduction in supply has led to increased competition for alternative LNG sources, notably from the US, with Asian imports of US LNG expected to reach a record 4.23 million tonnes in July, as buyers in China, Japan, and South Korea seek to compensate for the shortfall.
The disruption at key production facilities further exacerbates the supply crisis. Qatar's Ras Laffan Industrial City suffered severe damage to two gas-processing units, affecting about 17% of its capacity, with repairs potentially taking up to five years. The UAE's Das Island plant has seen LNG loadings significantly reduced, and the Habshan gas-processing complex is operating at approximately 60% capacity. This prolonged output reduction, combined with higher shipping insurance costs and geopolitical uncertainty, is compelling countries like Pakistan to secure spot cargoes at elevated prices, with one recent offer for July 21-22 delivery at $20.6999 per mmBtu, highlighting the acute market pressures.
