Europe becoming the top destination for spot LNG cargoes has been one of the main developments on the global gas market in 2022, if not the main one.
Permanently high prices at the European gas hubs throughout this year have made it practically impossible for most buyers from outside the region to compete successfully for available volumes. And the only player who could have drawn LNG away from Europe just stayed on the sidelines for most of 2022.
In the new price environment, South Asian buyers are among those hit hardest. Price-sensitive buyers in Pakistan and Bangladesh have not received any spot LNG cargo for about six months, while the total amount of spot volumes delivered at Indian terminals fell YoY by about a third between June and November 2022, according to Kpler.
But even at its peak the share of South Asia in the global LNG market was quite small, which of course would not allow European buyers to significantly expand imports.
To succeed, Europe had to hope that another condition is met, and that is Chinese buyers staying away from competing aggressively for available supply. Luckily, that is exactly what happened, otherwise European importers would have faced much higher costs and risks.
In comparison with 2021, spot LNG imports to China decreased almost twice in the first 11 months of 2022, freeing up more than 1 million tons per month for other buyers. No surprise that the recent news on CNOOC´s tender to buy cargoes for delivery starting in February 2023 have attracted so much attention in the market.
The question of how strong demand for LNG among Chinese buyers will be next year is one of the key unknowns in 2023. For Europe to balance the market, it is only the scale of further gas demand response that will be as important as the level of competition with China for spot cargoes.
Source: Yakov Grabar (LinkedIn)