Asia LNG Prices Hit Four-Month High Amid Middle East Shipping Fears

Asia spot liquefied natural gas (LNG) prices reached their highest level in four months on July 24, climbing to $22 per million British thermal units (mmBtu) for September delivery into northeast Asia. This increase follows a week-on-week rise from $20.10/mmBtu, driven by fears of wider shipping disruptions in the Middle East.

The Strait of Hormuz has seen a significant drop in tanker crossings, with only one vessel passing through on July 23—the lowest level since May 7. This decline is attributed to tit-for-tat attacks between the U.S. and Iran, which have heightened security concerns for shippers.

In response to these disruptions, major oil producers are seeking alternatives to the Strait of Hormuz. At least seven pipeline projects are under construction or discussion to redirect supplies through ports along the Red Sea and the Gulf of Oman. Meanwhile, India has increased its exports of light and middle distillates to 1.55 million barrels per day in July, helping to alleviate fuel shortages in Asia.

The U.S. has also begun importing fuel oil from Iraq via Syria for the first time, with three Aframax tankers delivering cargoes between June and July. Additionally, two Chinese supertankers carrying Saudi Arabian oil are heading toward the Bab el-Mandeb strait, highlighting the shifting dynamics in global energy trade routes.

The escalating U.S.-Iran war threatens Asian oil refiners' plans to ramp up output in August, potentially keeping global fuel stocks tight and bolstering prices. Attacks between the U.S. and Iran have throttled Gulf crude exports through the Strait of Hormuz, where a fifth of the world's oil previously passed before the war.

Yemen's Iran-aligned Houthis have threatened to block Saudi Arabian exports from the Red Sea, which could force more than 3 million barrels per day of Saudi crude bound for Asia through the Bab el-Mandeb waterway to take much longer routes. On Tuesday, three tankers carrying Saudi crude bound for China and India through Bab el-Mandeb made U-turns, heading towards the Suez Canal.

Asian refiners who had lined up crude supply for August are now bracing for delays in shipments from the Middle East. Processors in the U.S. and Europe are already running near capacity. Russia has banned diesel exports due to Ukrainian drone attacks on its refineries, further tightening global oil products supply.