Natgas Prices In Asia And Europe Sky-Rocket Amid Deep Freeze

The price of LNG reached unprecedented lows in the spring of 2020; but, as OilPrice's Venand Meliksetian points out, a year later, the revitalization of the market is a fact. Prices of supercooled fuel in especially Asia have reached astronomic heights due to a combination of factors.  The most important LNG buyers-markets are in Asia and Europe. The latter, however, also enjoys a well-developed crossborder pipeline infrastructure that connects producers in Russia, North-Africa, and the Caspian to consumers. Asia, on the other hand, is much more dependent on LNG. Therefore, the top three largest importers are all Asian: Japan, China, and South-Korea.

The rise in LNG prices has several explanations.

First, economic activities have remained relatively strong in Asia throughout the year. China was the first country to experience a lockdown in February 2020 due to the spread of the Coronavirus. Other East Asian countries also implemented rapid and aggressive measures to mitigate the health crisis. The economy experienced a rebound while most countries were still grappling with the pandemic. Demand for commodities such as LNG, therefore, has remained strong.

More important, however, is the cold winter weather. BAMWX meteorologist Kirk Hinz first alerted us about a massive spike in temperatures happening miles above the North Pole, resulting in a sudden stratospheric warming event (SSWE) splitting the polar vortex into two. This means Arctic temperatures are pouring into parts of Asia and Europe, at the moment, sending natural gas prices in those regions sky-high. 

Bloomberg's Javier Blas tweeted Monday that "LNG Asian benchmark JKM has jumped to a fresh all-time high of $28.2 per million British thermal units, up 32% from Friday" due to increased power demand because of the cold weather in the region.

Last week, China's power demand surged as Arctic air blanketed parts of the country, sending power demand to record highs. 

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