Around the world, analysts and traders are grappling with the biggest shakeup in the 60-year history of liquefied natural gas: The emergence of two new superpowers, the U.S. and China, who are bringing more uncertainty and price fluctuations to a once-staid commodity market.
China became the biggest importer of liquefied natural gas in December, overtaking Japan for the first time since it pioneered the industry in the 1970s. Meanwhile, the U.S. is set to become the world’s top exporter of the fossil fuel on an annual basis later this year, beating out cornerstone suppliers Qatar and Australia.
Neither of the two superpowers are as predictable as their predecessors, and data from China is particularly hard to come by. That’s helped fuel wild swings in LNG spot prices as it’s become a traded commodity, similar to crude oil. To keep up, trading desks have proliferated globally, with Japanese LNG giants like Tokyo Gas Co. and Osaka Gas Co. setting up their own, while banks Macquarie Group and Citigroup Inc. are hiring traders to cash in on the volatility.
Gas markets have never been this volatile. They’re trading up and down on single days in ranges they barely covered over decades. European natural gas prices, often used as a benchmark for LNG, hit a record high of 180 euros per megawatt-hour in mid-December, before collapsing more than 60% in the next 10 days.
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