Asian LNG supply squeeze opens up arbitrage from west to east

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.