With the US and Iran both re-blockading the Strait of Hormuz and energy supplies from the Middle East remaining stalled, DES Northeast Asia spot prices for LNG again approached $20.00/mmBtu. As of Jul 15, second-half August delivery prices rose to around $19.65. This marks a 28% surge from the levels seen after the US and Iran signed a Memorandum of Understanding (MOU) for a ceasefire on Jun 17.

　 State-run QatarEnergy was initially expected to restore LNG production within a month, excluding two liquefaction trains damaged by Iranian attacks. However, following an attack by Iran on the Q-Flex type "Al Rekayyat" (capacity 216,200cbm) of Qatari registry in the Strait of Hormuz on Jul 7, LNG shipments from Qatar and the United Arab Emirates (UAE) were once again suspended. Go Katayama, Principal Analyst at European data analytics firm Kpler, while indicating that Qatar's production is expected to resume after October, commented, "If this scenario does not materialize, DES Northeast Asia prices could be above $20." The slower-than-usual pace of natural gas inventory filling in Europe is also a concern, as it could lead to a spot scramble with Asian end-users.

　 As mid-July approaches, the focus of spot negotiations is shifting to September delivery and beyond, after the peak demand season. For August delivery, traders and portfolio players with term supply commitments to Northeast Asian importers have been actively pushing for buybacks in the spot market. With no clear outlook for the recovery in LNG supply from the Middle East, if similar movements are observed in the September delivery market, the upward trend in prices is likely to strengthen.

　 On the other hand, there are no signs of Chinese or Japanese importers engaging in a 'buying spree' for LNG. According to Chinese end-users and LNG brokers, China, the world's largest LNG importer, is increasing its spot procurement volumes in preparation for winter, but "no urgent purchases are observed," said a broker. Furthermore, during the summer when there is no drift ice, LNG from the 19.8 mil mt/year Arctic 2 project in Russia is expected to flow into China frequently via the eastbound route through the North Sea, which "will curb the rise in DES Northeast Asia prices," the broker added.

　 Japan's LNG inventories for power generation also rose to a record high of 2.42 mil mt as of Jul 12, this year. While these LNG inventories stored at power plants are expected to be depleted as temperatures rise and air-conditioning demand increases, "major Japanese power companies have already secured LNG arriving in Japan during the summer to cope with heat waves. Instead, their strategy will likely be to resell any surplus LNG. In that case, it cannot be said that the upward trend will continue," said an Asian trader. Therefore, if geopolitical risks based on the Middle East situation recede, prices also hold the possibility of a sharp fallback.