Liquefied natural gas (LNG) prices in Asia have surged past $30 per million British thermal units (mmBtu) for the first time since December 2022, driven by escalating risks in Middle East shipping routes. The price spike follows an attack on an LNG tanker in the Gulf of Aden, near Yemen, where a small boat fired at the vessel. The tanker's crew responded with warning shots, according to the UK Maritime Trade Operations (UKMTO).
The incident highlights growing concerns over the safety of energy flows from the Middle East. Despite the attack, a tanker carrying LNG from Qatar is currently navigating the Red Sea en route to Poland, fulfilling a long-term supply deal between QatarEnergy and Poland’s Orlen. However, the heightened risk of attacks could deter stronger gas flows to Europe, which is already facing storage challenges.
European storage sites are only 74% full this week, significantly below the five-year seasonal average of 89%. Meanwhile, high LNG prices are dampening demand in Asia, with less wealthy nations turning to coal as an alternative. Europe, however, has limited options due to its decarbonization efforts, which have led to the shutdown of many coal power plants, leaving it with no choice but to pay premium prices for LNG.
The latest price jump could further reduce Asian demand, exacerbating the supply-demand imbalance in the global LNG market. The situation underscores the delicate balance between securing energy supplies and managing geopolitical risks in key shipping routes.