Asia gas prices jump after Russia pipeline maintenance sends Europe benchmark price to record

LNG traders in Asia expressed concern that the Nord Stream link will not return to service as planned. PHOTO: REUTERS

SINGAPORE (BLOOMBERG, AFP) - Asian liquefied natural gas (LNG) prices extended gains as concern mounted that Russia's announcement of maintenance on a key pipeline to Europe would further tighten global supplies.

Producers offered LNG spot cargoes for winter above US$60 per million British thermal units (BTUs) on Monday (Aug 22), traders said.

The Japan-Korea Marker spot benchmark slipped 1.3 per cent to US$55.277 per million BTUs on Friday before Gazprom's announcement, they said, citing data from S&P Global.

Prices gained for five straight weeks and are trading at triple last year's level.

Gazprom said on Friday that it would stop the key Nord Stream pipeline for three days of maintenance on Aug 31, helping push Europe's benchmark price to a record.

While the pause is ostensibly for maintenance, Berlin has accused Moscow of halting supplies due to Western sanctions imposed over Russia's invasion of Ukraine.

LNG traders in Asia have expressed concern that the link will not return to service as planned, which would further tighten global markets after Russia progressively cut deliveries to Europe, its biggest customer.

Gazprom said on Friday that shipments through the link under the Baltic Sea to Germany would be restored to current levels, equal to about 20 per cent of capacity, “upon completion of the work and the absence of technical malfunctions”.

“We now assume that Russian gas flows to Europe via Nord Stream 1 will fluctuate between zero and 20 per cent capacity in the coming months,” said senior analyst Matt Oxenford of the Economist Intelligence Unit.

This, he added, would lead to a recession in Europe in the winter of 2022 to 2023.

Utilities in Europe and Asia are in direct competition for LNG shipments from suppliers including the United States, Qatar and Nigeria, and traders are getting locked in bidding wars to attract cargoes. Japan and South Korea are currently looking to procure more spot LNG for winter, which has helped push prices to the highest level for this time of the year.

Meanwhile, China may struggle to meet peak power demand following hydropower disruptions in the Sichuan region, Bloomberg Intelligence said on Monday, adding that it expected both LNG and coal prices to continue rising in the near term.

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