Europe braces for LNG tug of war with Asia

A global tug of war for liquefied natural gas cargoes threatens to push prices higher as Europe seeks more winter supplies and Asian buyers pay more than before. LNG prices have more than doubled since the US-Iran war outbreak, with Platts JKM at almost $30 per MMBtu in mid-September and $25.29 on Friday. European deliveries were at $24.62 per MMBtu. Despite prices being below 2022 peaks, analysts warn competition could escalate as developing Asian nations, previously priced out, now pay up to limit economic damage. This shift could raise costs for European buyers as the EU enters winter with its lowest gas stores in at least 15 years.

Takayuki Ueda, CEO of Japan’s Inpex Corporation, called the willingness of price-sensitive Asian buyers to pay more a “fundamental shift in the gas market,” noting India and Pakistan are now accustomed to volatility and eager to buy. Martijn Rats of Morgan Stanley observed Pakistan and Bangladesh buying multiple cargoes at $25 per MMBtu—unseen in 2022—meaning Europe may need to pay more. Liz Westcott of Woodside Energy said Asian ability to compensate for constrained LNG supply is real but not infinite. Anders Porsborg-Smith of Boston Consulting Group deemed Asia-Europe LNG competition “inevitable.” Chinese renewed buying or lower freight rates could redirect cargoes to Asia. Goldman Sachs analysts said Indian industrial users see $30 per MMBtu as a payment threshold, with continued Gulf attacks potentially pushing prices to $35 per MMBtu this winter.