The price of liquefied natural gas (LNG) in Asia could rise above $20 per million British thermal units this winter, as Europe’s tightening supply creates a ripple effect, according to a forecast by Goldman Sachs.
Samantha Dart, co-head of global commodities at the bank, explained that Europe’s energy situation is vulnerable due to several factors: a lack of spare capacity, the ongoing reduction of Russian gas flowing through Ukraine, and the onset of a colder-than-usual winter. These issues, combined with high demand, are driving prices up, she told Reuters.
For the past two winters, Europe has enjoyed relatively mild temperatures, which kept gas demand lower. However, even with the seasonal uptick in demand, Europe saw increased LNG imports and higher prices due to tighter global markets. This winter, with colder temperatures now setting in, Europe faces a significant surge in demand for both electricity and gas.
Earlier this year, European gas prices spiked after a production outage at a Norwegian platform and heightened geopolitical tensions in the Middle East. Though prices eventually stabilized, the event highlighted Europe’s ongoing challenges with energy security. In an effort to reduce its reliance on fossil fuels, Europe has heavily invested in wind and solar power—both of which tend to underperform in winter. As a result, Europe remains dependent on imported gas, driving up prices and contributing to competition with Asian markets.
Last week, the European gas benchmark, the Title Transfer Facility (TTF) price, surged to its highest level in two years as winter demand for heating increased. LNG traders have already started rerouting cargoes from their usual Asian destinations to Europe, which is offering a premium for the gas. According to Argus data, at least 11 LNG cargoes have been diverted in recent weeks. This shift in supply signals that a price surge in Asia is imminent.
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