Europe is again intensifying competition with Asia for limited liquefied natural gas supplies as prices climb sharply ahead of winter. On the spot market, LNG traded at $26 per million British thermal units in the week ending September 11, and the report says there are few signs of a near-term decline.
According to Kpler, LNG inflows into Asian countries are estimated at 20.09 million tons in September, down from 22.27 million tons a year earlier and 22.25 million tons a month earlier. At the same time, Europe’s LNG imports are expected to rise to 7.98 million tons this month and could increase further to as much as 10.53 million tons in October.
European buying is being driven by gas storage levels across the European Union, which remain well below the five-year average for this time of year. That leaves the region little choice but to attract more expensive cargoes, even if that means paying more than Asian buyers.
The market is also under pressure from constrained supply from Qatar. According to the article, QatarEnergy is seeking deals for U.S. liquefied gas through 2031 to make up for lost local supply in long-term contracts with international clients. The UAE is still moving some liquefied gas out of the Persian Gulf, but not enough to offset the loss of Qatari volumes.
Earlier this year, Qatar’s energy minister estimated the LNG supply shortfall caused by force majeure at about 12.8 million tons annually. While the market is counting on new U.S. export capacity, the article argues that those additions will not arrive fast enough to materially ease the situation for gas importers before winter.
As Reuters columnist Clyde Russell noted, Europe is once again having to pay a substantial premium to pull cargoes away from Asia. That process is being helped by affordability constraints among many Asian buyers. The article says spot LNG prices have surged 150% since February, before the United States and Israel began bombing Iran.
For the European Union, the strain is compounded by a lack of alternatives. Gas imports from Norway are already at peak levels, Russian pipeline gas has largely fallen out of the mix because of sanctions, and Russian liquefied gas is also set to follow from January. In that environment, the EU is increasing LNG purchases regardless of price. Kpler expects annual imports this year to exceed last year’s record 125.20 million tons. Over the first eight months of the year, imports had already reached 117.01 million tons.
The article also says European buyers delayed purchases for storage refilling earlier this year, betting on a quick end to the Middle East war and the return of Qatari gas to the market. That bet did not pay off, and buyers are now being forced to purchase at elevated prices while taking the risk that the market could soften later.
A similar dynamic played out in the winter of 2022, when European companies rushed to buy gas for winter supply, only for a mild season to reduce demand, send prices lower, and leave companies with billions in losses. This time, the article suggests that a repeat is less likely because Europe still had access to some Russian pipeline gas then, whereas that option is no longer available now.
In Asia, meanwhile, China is limiting spot LNG purchases and relying more on long-term fixed-price and oil-linked contracts. It is also receiving substantial pipeline gas volumes from Russia. The article argues that this diversification is helping cushion part of the impact from lost Qatari supply on the wider market.
As a result, countries that can no longer afford expensive spot LNG may turn more to coal and other sources of power generation. EU members that can still pay for spot cargoes, however, may have little choice but to keep buying despite mounting financial pressure.
