Record LNG LNG imports is the phrase that defines Europe’s current energy performance. The continent is on track to surpass its historical figures thanks to the boost from U.S. exports and weak demand from the Asian market.
Global dynamics set the pace for LNG
The global market for liquefied natural gas (LNG) (LNG) is going through a time of geographic tensions, regional decoupling and shifting dynamics. While spot prices in Asia continue to decline, LNG exports from the United States are growing rapidly and Europe is capitalizing on the opportunity. The key fact: the European continent is on track to post a new monthly record for LNG imports, driven by lower activity from Asian buyers, especially China.
During February, China has significantly reduced its presence in the spot market. Imports from the Asian giant are estimated at 3.38 million metric tons, their lowest level since April 2018. This reduction is explained by two factors: a moderate winter in much of the country and a preference for long-term contracts, more stable compared to current spot prices hovering around $10.60 per mmBtu. The lower competitiveness of LNG compared to piped gas has also played a role.
Europe and its record LNG imports
China’s partial withdrawal from the spot market has opened a window that Europe has been able to take advantage of. Kpler estimates that 14.2 million tons of LNG will arrive on the continent in February, which would surpass January’s record and represents an increase of 22% over the same month of the previous year. The United States is the main supplier, with 8.05 million tons, equivalent to 57% of the total.
U.S. LNG has displaced much of the pipeline supply from Russia, although Moscow still maintains a significant presence with 1.6 million tons imported. Europe’s need to replenish its gas inventories, which are at 32% of capacity – well below the five-year average of 49% – underpins high winter demand.
The growth of LNG exports from the U.S. LNG exports from the U.S. continues continues at a steady pace. For March, a volume of 11.19 million tons is projected, just below the all-time record recorded in December. Compared to March of the previous year, the increase would be 26%.
A fragile balance between supply and demand
This increase in supply has been key to stabilizing the market, despite the risks associated with geopolitical tensions in the Middle East, particularlyparticularly on shipments from Qatar, the world’s second largest exporter. So far, the robustness of U.S. production has kept spot prices at relatively low levels, even in a context of high demand in Europe and steady flows to Asia.
The current scenario combines three vectors: a growing supply led by the US, a European demand sustained by the winter and the need for replenishment, and an Asian demand that, although stable in volume, changes in composition as spot purchases are reduced.
The coming weeks will show whether this fragile balance holds. Market players will remain attentive to both weather developments, geopolitical tensions and the ability of the United States to sustain this pace of exports.
Source: Reuters
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