As winter approaches, LNG markets have started to heat up. Surely, 2022 was an exception as LNG spot markets saw never before seen rally, fueled by the Russia-Ukrain war and harsh winters across Europe. The bull rally has surely started, as the JKM Platts LNG Futures have gone up 29 percent in October alone – the single largest monthly increase since the 2022 Russi-Ukraine war fallout.

There is not a sudden demand surge yet as temperatures in Europe and Far East Asia are tipped to be well within the normal historic ranges. The increase so far has not resonated the crude oil movement either. The biggest contributor so far is the unknown in the ongoing Israel-Palestine war – as the likes of World Bank have warned that the ground operation, if extended, could even take oil to $150//bbl.

The most immediate casualty of the Israel war so far has been the supply disruption of gas from Israel – which Egypt imports. Egyptian gas reserves have now dwindled as it ordered fertilizer plants to shut much ahead of planned shutdowns – to make up for the lost molecules from Israel. Elsewhere, the inventories in Europe and Japan are brimming – as most countries shopped for winter in anticipation earlier this time around.

This should theoretically mean more LNG vessels making way to Asian markets in the next three months – unlike last two years. China has continued to buy from the spot and keeps entering long-term contracts every quarter. Even the likes of Pakistan, have reportedly secured supplies for December and January windows. Too early to say if cancellations happen from the buyers’ or sellers’ side around the delivery window or not – as that will largely depend on affordability and availability – both of which have started to appear increasingly uncertain.

Pakistan LNG Limited has a bid for December delivery at $19.3/MMBtu – which is around the current JKM spot prices, but way higher than October’s average delivered-ex ship price of close to $12//MMBtu. The Brent slope for state contracted LNG from Qatar will likely stay on the higher side as well – given higher risk of upside in global Brent price.