US gas prices have surged 193 percent, touching a 7-year high with spot LNG prices up 650 percent from March lows. CNBC-TV18’s Sonal Bhutra explains what is causing this and the outlook.

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The analysts have been talking about how the commodity price inflation across the board has taken place, what has not caught eye is the massive increase in gas prices globally.

The Asian spot LNG prices have surged 650 percent from March lows and are at a multi-year high of 15/mmbtu. This is due to a number of reasons - there has been an increase in demand, logistical constraints globally and also global LNG storage level depleted sharply over the last 6 months.

European LNG storage declined to 29.8 percent in April 2021 versus 92 percent in November 2020 and non-EU storage also declined to 35 percent levels from 75 percent in November 2020.

What has happened to the spot LNG prices in last few months? In April last year, the prices were as low as $2/mmbtu and hovered around those levels till July but come August prices doubled to $4/mmbtu and since then there have been continuous uptick. It reached levels of $15/mmbtu in December and usually during winters, there is a spurt in gas prices. But the rise continued in January as well due to extended winters, the winter storm in Texas led to a surge in prices to $19/mmbtu. That came down gradually to $6, but since then there has been on an upmove and has climbed back to the levels of $15/mmbtu as of now.

Mostly, spot LNG cargoes concentrated in the Asian markets with China being the largest spot LNG market in 2020. This is followed by Japan, India, Turkey and South Korea. There are some supply issues globally but for now Australia has the biggest export capacity with 22 percent market share, Qatar also has 22 percent share followed by the USA and Russia.

The total gas liquefaction capacity has increased in 2020 to 454 mmtpa from 430 in 2019 and there have been some delays in new projects due to COVID delays and there is an expectation of new supply from the US, Russia and Qatar that could curb prices a bit.

It is not only Asia spot LNG, US Henry Hub prices have also surged 193 percent from the levels that were seen in April 2020 and are at a seven-year high.

European natural gas rates have surged more than 1,000 percent from a record low in May 2020 and now domestic prices are also set to increase by 70 percent in October reset. A lot of sectors use gas as raw materials, electricity, vehicle fuels, fertilizers, industrial manufacturing and this absolutely is impacting the global economy.

The shift from fossil fuels to gas could also spurt the demand and ultimately prices will go higher. So the additional supply is something the market is hoping for that could curb the prices.

Watch accompanying video for more.

(Edited by : Bivekananda Biswas)