Freezing temperatures across Asia and Europe are driving liquefied natural gas (LNG) prices to record highs and pushing up the cost of shipping the fuel globally as buyers grapple with tight inventories and a shortage of tankers.
Demand for super-cooled natural gas has surged in recent years as buyers, particularly China and India, move away from dirtier coal-polluting power plants. Prices had remained relatively low until late 2019, when unexpected cold weather and bottlenecked shipments caused prices to surge.
Spot Asian LNG prices are up more than 1,000 per cent since touching a record low below $2 per mmBtu in May during lockdowns to stem the spread of the coronavirus. US natural gas prices hit a six-week high on Tuesday, while the cost to ship LNG from the United States to Asia hit an all-time record, in part due to a logjam in the Panama Canal, where vessels transit from the US Gulf to the Pacific.
“This bottleneck for shipping has an immediate impact on the demand for gas. Storage supplies are low and therefore, demandi s high,” said Toby Dunipace, with shipbroker SSY in a report this week.