The price of liquefied natural gas (LNG) in the spot market of Asia has exceeded $30 per million British thermal units (mmBtu), marking the highest level since December 2022. This price increase followed reports of an attack on an LNG tanker in the Gulf of Aden, off the coast of Yemen.
Attack on LNG Tanker and Its Impact on the Market
Reports indicate that an LNG-carrying vessel was targeted by a small boat in the Red Sea. The tanker crew responded to the attack and fired warning shots. This incident suggests that a return to normal energy flows from the Middle East may not be easily achievable.
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Factors Affecting LNG Demand in Asia and Europe
Liquefied natural gas has been trading above $25 per million BTU for about a month, as demand for this fuel has increased ahead of the winter heating season. Asia and Europe are striving to secure as much gas as possible for winter, while prices are rising. Despite the reported attack on the tanker in the Red Sea, a tanker currently en route from Qatar to Poland indicates Qatar Energy's efforts to fulfill its long-term contracts.
Due to Qatar's gas shortage, LNG demand in Asia is decreasing, while Europe is willing to pay higher prices to meet its needs. Currently, gas reserves in Europe are only 74% full, which is lower than the five-year seasonal average for this time of year (around 89%). With the recent price increases, Asian demand may further decline, and less wealthy countries may turn to coal. While Europe does not have the option of coal, as many EU member states have shut down their coal-fired power plants in line with decarbonization efforts, this forces them to pay any price for liquefied gas.
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