Asia's liquefied natural gas prices have jumped, opening up arbitrage opportunities for traders to ship cargoes from the Atlantic to the east. This shift is intended to replace Qatari supply lost during the US-Iran war, analysts said.
Cargo diversions could intensify competition between the Atlantic and Pacific basins as the Middle East conflict curtails shipments and halts output from Qatar. Asian buyers take more than 80 per cent of Qatar's LNG exports, according to data from analytics firm Kpler.
"Global front month arbs have increased significantly and are now open to Asia across several major export locations," said Spark Commodities analyst Qasim Afghan in a Tuesday note.
The US front month arb has increased in favour of Asia delivery, he added, while the Norwegian arb to Asia has also opened for the first time since 2023.
The JKM-TTF spread is up $5.10 to +$5.00 per mmBtu in favour of Asia since Friday, Afghan added. JKM is the benchmark for spot LNG cargoes in Asia, while the Dutch Title Transfer Facility (TTF) is Europe's main gas benchmark.
Platts benchmark Japan-Korea LNG marker (JKM) rose 68.52 per cent to $25.393 per million British thermal units (mmBtu) for April delivery on Tuesday, the highest level in three years, said David Henry, SP Global Platts global head of price reporting methodology, as the US-Iran war and production suspension in Qatar sharply tightened the market.
Comparatively, spot LNG delivered to Northwest Europe for April delivery rose by 57 per cent, or $5.60, to $15.479 per mmBtu on March 2, its daily biggest gain since 2022, added Henry.
Trades conducted in Platt's market on close (MOC) platform on Tuesday include TotalEnergies selling one LNG cargo to Glencore for April 8–10 delivery at $24.15 per mmBtu. This transaction featured a base discharge port of PipeChina Tianjin, China.
So far, one LNG tanker that loaded in Nigeria last week has diverted to Asia from its initial Atlantic-bound course after spot prices surged.
The BW Brussels LNG tanker loaded a cargo from Bonny LNG in Nigeria on February 27 and was moving west before turning to head south on March 3, data from Kpler showed.
"BW Brussels...appears to have changed course from an initial signal toward France and is now heading toward Asia via the Cape of Good Hope," said Go Katayama, principal insight analyst at analytics firm Kpler.
"This likely reflects the widening Atlantic–Pacific arbitrage, with stronger Asian pricing making diversions of destination-flexible Atlantic cargoes more attractive."
If the spread persists, we could see more similar diversions. This trend likely highlights the increasing volatility within the global energy market.
To replace Qatari supply, India is scouting for alternative sources to import LNG, a government source said. Bangladesh plans to issue two tenders seeking prompt LNG cargoes, an official at state-run Petrobangla said.
"The buyers which will be most aggressive at near-term spot purchases will likely be in the Asia-Pacific markets," said Ross Wyeno, associate director, lead LNG short-term analysis at SP Global Energy.
"However, deep liquidity in the TTF financial markets may provide a strong incentive to keep many flexible Atlantic Basin cargoes pointed towards Europe."
(Reporting by Emily Chow in Singapore, Helen Clark in Perth and Marwa Rashad in London; additional reporting by Arathy Somasekhar in Houston; Editing by Florence Tan and Nivedita Bhattacharjee)
