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Asian natural gas prices are rallying on fears that Russia will slash supply again and worsen a global fuel shortage.
The North Asia liquefied natural gas benchmark jumped 12% Friday, and is trading near the highest level since Russia’s war in Ukraine upended the global market, according to data from S&P Global. Prices have room to rally further as several Asian importers are desperate for supply through the rest of the year.
The natural gas market is on edge after Russia threatened to curb supply to Europe as soon as this week, only days after the restart of the crucial Nord Stream pipeline. LNG buyers in Japan and South Korea need to secure supply to refill inventories before winter, and are starting to outbid rivals in Europe.
President Vladimir Putin has warned shipments via the Nord Stream pipeline could drop to 20% of capacity, from a current rate of about 40%, if a key part isn’t returned to Russia in the coming days. A turbine that helps pump gas into the network has been stranded in Germany and Canada due to sanctions and missing paperwork.
The equipment missed a ferry sailing on Saturday, though transportation may happen in the next few days, Kommersant reported, citing people it didn’t identify.
Buyers aren’t convinced flows through Nord Stream — Russia’s biggest pipeline to Europe — are guaranteed. In response, Asian consumers are accelerating spot purchases for fall and winter delivery, according to traders with knowledge of the plans.
Read more: Europe Frets With Gas Flows Still at Risk After Pipeline Restart
Asia and Europe are in hot competition for a dwindling pool of LNG shipments. Gas prices in both regions are trading at a seasonal record high, and could climb further if Moscow limits gas supply to Europe.
Sudden outages at LNG export facilities have forced traditional suppliers, like Shell Plc, to purchase replacement shipments from the spot market, said the traders, who asked not to be identified to discuss private matters. That’s also helped push prices higher in Asia over the last week, they said.
