Keep an eye on LNG as it is an up signal in the cold wind

Liquefied natural gas (LNG) price for the 4th quarter rose above $20 MMBtu. Production sources, including Europe, Asia, and the United States, reduce their exports.

The price development of LNG is likely to increase and stabilize at a high level in the fourth quarter of this year. This is due to higher demand as winter approaches, and European natural gas reserves this year are below the five-year average. This raises concerns that the natural gas supply may not be sufficient to meet demand.

Bloomberg estimates that global LNG demand will increase by 34.8 million tons in December and 36.2 million tons in January 2022, up from 29.7 million tons in August.

The price of LNG in the Asian market has increased. In March, the average price was still $6.4 per MMBtu and has been rising steadily since then. In August, the LNG price reached an average of $16.9 MMBtu before rising further to a price of $21.3 MMBtu in September.

The last daily price on September 21 was $26.00/MMBtu. This is the highest level since mid-January 2021 when the price reached $32.50/MMBtu.

Meanwhile, Title Transfer Facility (TTF) natural gas prices in Europe are currently at a record high of $24.5 per MMBtu. One reason for this is that demand for electricity has risen sharply due to heat waves. This is true in both Europe and Asia, including the recovery of demand from the COVID-19 pandemic as vaccines have already been able to be disseminated to much of the world.

Moreover, there were problems with the supply of natural gas from production sources in Europe, Asia and the United States. There are plans to reduce natural gas exports in the second half of September. In addition, the LNG plant of the Malaysian energy company Petronas in Bintulu is threatened with the suspension of exports on the spot market.

As the United States struggled with production during the hurricane season, LNG exports were temporarily disrupted by the effects of Hurricane Ida and Tropical Storm Nicholas. Small portions of natural gas production in the Gulf of Mexico are still interrupted as a result.

The price of coal, which is also used to generate electricity, rose to a record high. Carbon offsets also reached a record price in Europe. The development of coal prices and carbon credits therefore also needs to be monitored, as they have a significant impact on natural gas demand.

Analysts from various bureaus expect LNG prices in the Asian market to continue to rise in Q4, perhaps to record prices like those seen in January.

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