Runaway LNG price sends warning to gas buyers

Source: Australian Financial Review

12th January 2021

An unprecedented surge in prices for LNG in Asia is ringing alarm bells among industrial energy users on the east coast amid forecasts that domestic gas prices could be driven back up into double figures, despite lacklustre demand.

Freezing winter temperatures and a supply squeeze have driven north Asian spot prices for LNG to a six-year high of about $US15 per million British thermal units, an astonishing turnaround from the sub-$US2 levels of last June.

The sharp rally has triggered a spike in estimated LNG “netback” prices – the equivalent price in Australia to the spot Asian LNG price – to levels not seen since the competition watchdog started publishing netback prices at the beginning of 2016.

That spells price pain for gas-dependent manufacturers on the east coast hoping for more affordable contract prices for the fuel, but relief for LNG exporters such as Woodside Petroleum, Santos and Origin Energy that were hit hard by last year’s slump in prices.

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