Chinese demand, accentuated by the cold snap, is driving up prices in Asia and, by extension, in Europe. Faced with this increased consumption, global supply is under stress. Tariffs for ships carrying liquefied natural gas are breaking records.

Gas is twice as expensive as oil! This is the unprecedented consequence of a particularly harsh winter in China, the repercussions of which are felt in the four corners of the planet, and even on the bill of gas subscribers in France.

Earlier this week, the price of liquefied natural gas (LNG) imported by Northeast Asia surpassed $30 per million btu (British thermal unit, the benchmark measure in this market). said Michael Stoppard, an analyst at IHS Markit. At this price, gas is twice as expensive as oil for an equivalent amount of energy, which had never happened.

Highest since 2018

Beyond this record, which remains anecdotal, gas prices, which fell very low in 2020 with the health crisis, have skyrocketed since December. In Asia as in Europe where prices, listed in Rotterdam, are at their highest since September 2018.

In France, the gas bill of individuals has been on an upward trend since last summer and the increase should continue, given the increase observed on the international markets. The average price per megawatt hour on the wholesale market exceeded 28 euros this week in France, a level that had not been reached since 2018.

Exceptional temperatures

A combination of factors explains this exceptional situation. First, an exceptionally harsh winter in North Asia, particularly in China. In Beijing, the thermometer dropped to -20 degrees. The Chinese capital had not experienced such freezing temperatures since the 1960s. Temperatures are lower than usual also in Korea and Japan.

This cold snap only confirms a fundamental trend, at work since the end of 2020. In Asia, the health crisis is over and the demand for gas for heating, power generation or industry has returned to its pre-pandemic level, and even beyond.

The offer is struggling to keep up

This translates into a boom in liquefied natural gas imports: LNG tankers carrying more than 26 million tonnes of LNG arrived on Asian shores in December, a record amount, up 14% from December 2019. China is the world's second largest importer, behind Japan and ahead of Korea.

Faced with this strong demand, supply is struggling to keep up, which explains the surge in prices. LNG production units in Norway, Australia or Equatorial Guinea have had to reduce their exports for technical reasons, limiting the volumes available. And global inventories are low because of the drop in production in the United States last year, at the height of the crisis.

LNG tanker tariffs are exploding

To make matters worse, the maritime transport of LNG is under strain. There are not enough ships available, causing unprecedented cost inflation. In early January, the rate for renting an LNG vessel reached $350,000 per day, reports IHS Markit, up from a maximum of $200,000 in the winter of 2018-2019. The Panama Canal is congested, causing delays of up to two weeks for the delivery of American gas to Asia via the Pacific.

Soaring prices in Asia are prompting LNG producers to direct their cargo ships to the continent. As a result, imports of liquefied gas into Europe fell sharply. This reduction in supply explains the rise in prices on the Old Continent, although much less so than in Asia.

Total benefits

Oil and gas companies benefit, which allows them to partially compensate for the fall in oil revenues. As a result, Total benefited from an average gas production selling price of $3.31 per million btu in the fourth quarter of 2020, up more than 30% from the previous quarter. last year when demand was weakening, observes Thierry Bros, professor at Sciences Po. He is reaping the rewards today."