Liquefied natural gas (LNG) prices in Asia continue to climb, reaching $12.90 per million British thermal units (mmBtu) for September deliveries, the highest level since last December.
This rise in prices is directly linked to ongoing geopolitical tensions, notably the military incursions into Ukraine, which are fuelling fears of a disruption in Russian gas flows to Europe and, by extension, to Asia.
Indeed, any major disruption to Russian gas exports, which account for a crucial share of global supply, could have significant repercussions on LNG prices, leading to increased volatility on Asian markets.
In addition, European markets, influenced by the same tensions, have seen similar price rises, putting further pressure on Asian markets.
The situation is made all the more delicate by the fact that Asian buyers are increasingly reluctant to commit to the spot market, preferring to turn to long-term contracts to secure their supplies in uncertain times.
Energy demand and climatic conditions in Asia
Demand for LNG in Asia remains buoyant, largely due to the extreme heat waves affecting countries such as South Korea and Japan.
These exceptional weather conditions are increasing energy consumption, particularly for air conditioning, which is helping to keep prices high.
However, temperatures are expected to normalize in south-eastern China, which could temper demand over the coming weeks.
However, changing weather forecasts, in particular the weakening of the La Niña phenomenon, could alter this dynamic, with implications for winter gas demand in Asia and North America.
Industry professionals are keeping a close eye on these developments, knowing that any significant change could influence supply strategies and price movements on a global scale.
Impact on procurement strategies
Faced with these uncertainties, companies in the energy sector are adapting their supply strategies.
Rising spot LNG prices in Asia are prompting some players to reconsider their exposure to the spot market, opting instead for long-term contracts to secure their energy needs.
This trend could be reinforced if geopolitical tensions persist and weather forecasts continue to indicate conditions likely to increase demand.
The LNG market remains highly volatile, reflecting the multiple pressures simultaneously exerted on supply and demand.
Industry players have to navigate in a complex environment, where strategic decisions must take into account not only current market dynamics, but also the medium and long-term outlook.
