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Interconnected gas markets likely to lead to long-term LNG volatility

January 20, 2021

Last week’s record-high spot prices of liquefied natural gas (LNG) in Asia may not hold for long, but the surge could be a sign of what the future holds for natural gas prices globally.

The growing LNG trade and the growing importance of LNG on the global gas markets have upended the way part of global gas supply is traded and has made regional gas markets more interconnected. When spot LNG prices rally in north Asia, LNG sellers rush to send cargoes there, leaving fewer LNG supply going to Europe, where natural gas prices rise in a generally tighter market.  

“While contract gas prices have been low and relatively stable in recent years, this is unlikely to last,” Bruce Robertson, Energy Finance Analyst, Gas/LNG, at the Institute for Energy Economics and Financial Analysis (IEEFA), said in a briefing note last week.

“With lower levels of drilling, financial instability in the oil and gas industry, and low levels of industry investment, it is likely that a new era of higher prices and more volatility is upon us,” Robertson added. 

[Tsvetana Paraskova]

More: What’s Next For Very Volatile Natural Gas Markets

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