(Bloomberg) Russia’s latest move to cut natural gas supply to Europe is intensifying global competition for seaborne shipments of the fuel, threatening higher prices and shortages from Asia to South America.Utilities in South Korea and Japan are accelerating plans to purchase more liquefied natural gas cargoes for winter out of fear that Europe will also hoard supply, according to traders with knowledge of the matter. Even some price-sensitive buyers in countries such as India and Thailand are looking to procure cargoes and avoid a shortage, traders said.Russia’s Gazprom PJSC said it will reduce flows through the Nord Stream pipeline to Europe again this week, forcing the region’s buyers to find replacements like LNG. Spot prices of the super-chilled fuel, already trading at a seasonal high, are at risk of surging further as buyers in Europe and Asia move to outbid each other.
Traders estimate that North Asia spot LNG prices will rally to the mid-$40s per million British thermal units level on Tuesday, the highest since early March shortly after Russia invaded Ukraine. There is a shrinking pool of available LNG through this winter amid supply disruptions from export facilities in Australia and the US.
Natural gas is a key fuel for power generation and heating, and the price rally threatens higher inflation around the world. At this price level, buyers in some emerging nations — such as Pakistan, Bangladesh and Argentina — cannot afford spot cargoes of the fuel and are struggling with power shortages.South Korea is currently working on securing LNG cargoes from the spot market on wider supply concerns over geopolitical uncertainties, the energy ministry said. Any potential disruption to the country’s power supply may require more spot purchases, according to Korea Gas Corp.China — the world’s top LNG importer last year — has remained on the sidelines of the spot market due to virus restrictions curbing demand for the fuel. If China’s economic activity picks up, that could quickly change and result in fewer LNG cargoes for Europe, Samantha Dart, Goldman Sachs Group Inc.’s head of natural gas research, told Bloomberg Television last week.
Drivers
Egypt’s EGAS offered to sell two LNG cargoes on an FOB basis for loading in late July and early Aug.
Dana Gas says operations continue “as normal” after two small rockets landed within the Khor Mor bloc in the Kurdistan Region of Iraq
A reduction in Gazprom shipments on the Nord Stream pipeline to 20% of capacity is likely to push European benchmark prices to about EU190/MWh (~$57/mmbtu): Goldman
China Energy Investment Corp., the country’s top coal miner, lifted its investments and production as the government pushes for energy security and increased spending on infrastructure
European Union countries expect to reach a political agreement on emergency regulation that could force 15% cuts in gas consumption through the winter if Russia halts deliveries
Shell canceled a plan to halt pay for striking workers who were removed from the Prelude LNG export plant
Europe’s gas storage was at about 67% of capacity on Sunday, compared with the five-year average of 67% for this time of year
Estimated gas flows to US LNG export terminals were about 10.2 bcf/day on Monday, or -1.6% w/w
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