European buyers are paying up for liquefied natural gas even as Asian importers retreat from the spot market, with prices up sharply since February. Qatar's export outage and thin storage levels have again locked Europe and Asia in a race for a limited amount of supply.
Asia pulls back, Europe keeps buying
Liquefied natural gas is trading at levels few buyers can ignore. Spot LNG prices are up 150% from February, before the United States and Israel began bombing Iran. The cargo was changing hands at $26 per million British thermal units in the week to September 11.
Asian demand is set to decline this month and over the year, according to analysts. September LNG flows into Asian countries are estimated at 20.09 million tons by Kpler, down from 22.27 million tons a year earlier and 22.25 million tons a month earlier, according to Reuters' Clyde Russell. European imports, meanwhile, are on track to rise to 7.98 million tons this month and as much as 10.53 million tons in October, with EU gas storage still well below the five-year seasonal average.
Qatar's outage keeps the market tight
Qatar's LNG export hub remains largely closed. QatarEnergy is reported to be seeking deals for U.S. liquefied gas through 2031 to make up for lost domestic supply, and the country's energy minister put the annual shortfall at some 12.8 million tons earlier this year. The UAE is getting some gas out of the Persian Gulf, but not enough to cover the lost Qatari volumes.
Europe has few other options left
Norway's gas imports are already at their peak, Russian pipeline gas is barred under sanctions, and Russian LNG is due to stop reaching Europe in January, leaving the bloc little room to walk away from expensive cargoes. As a result, Kpler expects the EU's annual LNG imports to break last year's record of 125.20 million tons. Imports over the first eight months already stood at 117.01 million tons, with four months still to go.
A repeat of winter 2022, when European buyers overbought ahead of a mild winter and prices later slumped, is unlikely this time. Back then, Europe still had some Russian pipeline gas to fall back on; this year it does not. In Asia, China is limiting its spot purchases and leaning on long-term, oil-linked contracts and pipeline gas from Russia instead, while other price-sensitive buyers are turning to coal.
Source: Oilprice.com
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