Supply challenges generated by geopolitical tensions might have a direct impact on gas prices, according to an article published last Thursday (23)
The beginning of the peak consumption season in the European Union (EU), in a context of growing demand from Asia, might increase natural gas prices on the continent, despite the ample supply of liquefied natural gas (L) at global level , OilPrice reported this week.
According to the vehicle, the situation was worsened by a series of factors, such as geopolitical tensions, including the recent seizure of ships by the Houthi.
Supply chain challenges, such as restrictions in the Panama Canal and risks in the Suez Canal, have also caused concerns for transportation and global LNG prices, the report added.
“The vulnerability to any developments that might influence prices became clear earlier this week when European benchmark prices jumped following news that the Houthis seized a cargo ship in the Red Sea,” OilPrice wrote, noting that the vessel was linked to an Israeli company, and was therefore widely seen as a sign of a possible escalation of the conflict in the Middle East.
According to the report, citing S&P Global, some experts in the gas trading industry believe that LNG prices will not rise much, even in light of growing geopolitical risks in the Middle East.
Other experts suggest that shipping news has recently become very important for all types of goods due to restricted movement through the Panama Canal and riskier passage through the Suez Canal as a result of the Israel-Hamas conflict.
Asian buyers of US LNG have also been looking for alternative routes in the wake of limited movement at the main chokepoint between North and South America, which is expected to increase freight rates.
“Speaking of supply, it may be abundant, but as last year’s Freeport outage demonstrated, this abundance is one interruption away from a disruption and a price increase,” OilPrice wrote.
The explosion at a massive US gas export plant in June 2022 closed the facility for the remainder of that year.
Freeport, which accounted for a tenth of European LNG imports before the explosion, only reopened in February this year. The situation led to an increase in gas prices on the continent.
As temperatures drop in winter (Northern Hemisphere), gas prices might rise even further in the EU, while global prices might be more resilient, concluded OilPrice.
A warm winter last year and the EU’s efforts to hoard the fuel helped avoid a recurrence of 2021’s energy crisis, when gas prices in the region soared by more than 300 euros per megawatt-hour following the bloc’s decision to walk away. of supplies from Russia.
Gas prices in Europe have been volatile this week as traders factor in increased demand for heating in colder weather, with EU supply levels still nearly full.
First-month Dutch TTF natural gas futures, the benchmark for gas trading in Europe, were trading 1.3% lower on Wednesday (22), at USD 44.66 per megawatt-hour.