True global gas competition begins now

Since late 2021, European gas market has been a magnet for spot LNG. Amid record-high prices across the regional gas hubs, both traders and producers sent to Europe as many seaborne volumes as possible in the past months. At that time, Asia generally stayed away from engaging in aggressive competition for available supply. With the end of shoulder period, the situation in the global market might gradually change.

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As Asian importers need to refill terminal storage tanks and prepare for the summer peak consumption season, there has recently been increasing demand among them for LNG available worldwide. This is indicated, among other things, by the rising share of Asia-bound cargoes in US exports.

By contrast, American LNG flows to Europe is slowing down, which also is the case for Qatari shipments. While European terminals received more than 2 million tons from Qatar in April 2022, this month’s exports are expected not to exceed 1.3 million tons, according to Kpler data.

Due to intensifying activity among Asian companies (albeit still limited), LNG suppliers will likely have less to offer buyers from other regions. Just a while ago, many players buying cargoes in the US Gulf could easily prefer the UK or French terminal for delivery over regas facilities in Asia. But now, while performing their contractual obligations to Asian consumers, they are not so flexible in choosing destination of shipments.

Equally important, Europe itself has limited ability to receive and ‘process’ LNG cargoes. Lacking adequate cross-border gas infrastructure, regional players may find it quite difficult to continuously maintain strong imports. Especially given the fact that the region’s LNG reservoirs were filled up to two thirds of their capacity, as at 20 May 2022.

Source: Yakov Grabar (LinkedIn)