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IAA PortNews is not the author of this article and the editorial opinion can differ from that of the author.

  • Источник: https://www.spglobal.com

    2022 January 27

    Strong LNG imports to Europe offset lower Russian gas flows

    A flurry of LNG cargoes heading to Europe are likely to offset a sharp decrease in natural gas imports from Russia in the coming months, with robust supply available for power generation until the end of the heating season, analysis by S&P Global Platts showed Jan. 20.

    Gas imports by Russian-state controlled Gazprom have dropped considerably this winter, driving prices on the benchmark Dutch TTF hub to record highs.

    However, weak demand in Asia has kept the S&P Global Platts JKM contract — the benchmark for spot-traded LNG delivered to Northeast Asia — subdued, with a sizeable number of LNG cargos now approaching European shores, attracted by higher prices.

    European regasification hit record levels in mid January, with LNG sendout in Belgium, France, Italy, the Netherlands, Poland, Portugal, Spain and the UK rising to 451 million cu m on the Jan. 19 gas day, the highest ever level, data from Platts Analytics and the National Grid showed.

    LNG regasification averaged 363 million cu m/d over the Jan. 1-19 gas days, an increase of 142% on the year and higher than the 351 million cu m/d seen in November 2019, the current record month for LNG regasification in Europe.

    Strong netbacks driven by record-high prices in end-user markets in Europe and Asia last fall and during early winter incentivized exporters, especially in the US, to stretch capacity to the limits to produce more LNG.

    When inter-basin spreads turned negative and shipping rates fell sharply, many of those cargoes were pointed or diverted to Europe from Asia.

    The spread between the JKM and the TTF is often used as a sign of arbitrage potential between the Atlantic and Pacific basins.

    Entering the new year, relatively mild winter weather in Europe and Asia led to a decline in demand. The slots in Europe for prompt cargoes — those to be delivered in February — suddenly became elusive.

    “It is also a reflection of newly discovered elasticity in Asia-Pacific demand, with unprecedented tightness in Europe forcing it to price at a level that competes for flexible LNG, leading to switching and outright destruction of gas demand in spot exposed Asian importers,” Platts Analytics’ EMEA LNG Team Lead Luke Cottell said.

    European deliveries were boosted as a significant proportion of floating volume that had built up since October 2021 unloaded.

    “Strong LNG sendout and seasonally normal temperatures have weighed on TTF balance-of-winter market prices, helping to offset low Russian pipeline supply,” Cottell said.

    Strong LNG deliveries to Europe may continue on the back of weak buying activity in Asia, according to Cottell.

    On the prompt, the TTF front-month is at an ample premium to the JKM while DES Northwest Europe sits at a substantial discount to TTF front-month, pointing to strong demand for regasification capacity.

    March price dynamics could also encourage LNG cargoes to head to Europe, as opposed to Asia. Platts assessed DES Northwest Europe for March at $21.791/MMBtu Jan. 19, the lowest price since Sept. 16, 2021. Platts assessed the US FOB Gulf Coast Marker for March at $20.20/MMBtu Jan. 19. This was the lowest GCM has been since Nov. 1, 2021.

    Recent market activity suggests that JKM premiums could return for April. Additional US supplies could trigger more volatility, with a seventh major liquefaction terminal — Venture Global LNG’s Calcasieu Pass — preparing to begin exports in the next few months. The timing of when Gazprom’s Nord Stream 2 gas pipeline becomes operational will also be a factor, with additional supplies to Europe possibly reducing LNG consumption.