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 pressure. Rates for ships transporting liquefied natural gas are breaking

Gas is twice as expensive as oil! This is the unprecedented consequence of a particularly harsh winter in China, whose repercussions are felt all over the world, and even on the bills of gas subscribers in France

At the beginning of the week, the price of liquefied natural gas (LNG) imported by North-East Asia exceeded 30 dollars per million btu (British thermal unit, the benchmark measure on this market). “A new record has been broken,” said Michael Stoppard, an analyst at IHS Markit. At this price, gas is twice as expensive as oil for an equivalent quantity of energy, which has never happened before.

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 well as in Europe, where prices, listed in Rotterdam, have been at the highest since September 2018

In France, private gas bills have been on the rise since last summer and the increase is expected to continue, given the increase observed on 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

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 fell to -20 degrees, and the Chinese capital had not experienced such freezing temperatures since the 1960s. Temperatures are also lower than usual in Korea and Japan.

This cold spell only confirms a fundamental trend, which has been in place since the end of 2020. In Asia, the health crisis is over and the demand for gas for heating, electricity production or industry has returned to its pre-pandemic level, and even beyond.

The offer is struggling to keep up

This is reflected in a boom in liquefied natural gas imports: LNG vessels carrying more than 26 million tons of LNG arrived on Asian shores in December, a record amount, up 14% compared to 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 stocks are low because of the drop in production in the United States last year, at the height of the crisis.

LNG tanker prices are exploding

To make matters worse, the maritime transport of LNG is under pressure. There are not enough ships available, causing unprecedented cost inflation. At the beginning of January, the rental rate for an LNG tanker reached 350,000 dollars per day, IHS Markit reports, compared to a maximum of 200,000 dollars during 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 encouraging LNG producers to direct their cargo ships to this continent. In contrast, imports of liquefied gas into Europe fell sharply. This reduction in supply explains the rise in prices on the Old Continent, which, however, is much lower than in Asia.

Total benefits

Oil and gas companies are taking advantage of this, allowing them to partially offset the fall in oil revenues. As a result, Total benefited from an average selling price of its gas production of $3.31 per million btu in the fourth quarter of 2020, up more than 30% compared to the previous quarter. “The sector proved to be more flexible than expected by reducing production last year when demand was weakening,” observes Thierry Bros, professor at Sciences Po. He is reaping the benefits today.”