Launceston – The excitement of liquefied natural gas (LNG) between Europe and Asia seems to be returning to Asia as top-consumer buyers in the region begin to chase cargoes ahead of the peak of summer demand.
The dynamism of the LNG market for the first four months of the year was such that Europe was ready to raise prices for spot cargo to secure supply.
The competition for LNG came when Europe first struggled with a winter shortage of natural gas, and was then blinded by Russia’s invasion of Ukraine and the sudden demise that it would lose volume from its largest supplier.
Imports of European super-child fuels were at record levels during the January-April period, with refining data being the strongest on record in the first months of 2022.
Imports were 11.94 million tonnes in January, 10.39 million tonnes in February, 11.15 million tonnes in March and 11.79 million tonnes in April, giving a total of 45.27 million tonnes in four months.
This is 58% more than 28.61 million tons of imports in the first four months of 2021.
However, Europe’s imports in May are expected to be around 10.96 million tonnes, according to refinancing, which will be the weakest on a daily basis this year.
In contrast, Asian LNG imports are set to show some recovery in May, with refinance forecasts arriving at 20.46 million tonnes, up from 19.82 million in April.
In the first four months of 2022, Asia’s imports were 88.05 million tons, down 8.9% from 96.68 million recorded in the same period in 2021.
China is the leading importer of LNG in Asia, claiming the title of the world’s largest importer from Japan last year.
According to customs data, China’s imports in the first four months of the year were 21.59 million tons, down 17.3% from the same period last year.
However, there are signs of renewed interest from Chinese buyers, with refineries expected to arrive in May at 5.39 million tonnes, the highest since January.
The switch is coming?
Europe’s natural gas reserves have been massively replenished and Russian pipeline supplies are still flowing, with the continent likely to cut off its LNG purchases in the coming months.
However, Asia is already feeling hotter than normal in many countries, causing buyers to demand extra LNG cargo from the spot market.
Asian LNG prices rose, with futures trading in New York, linked to the S&P Global Commodity Insights regional benchmark, ending at. 22.60 per million British thermal units (mmBtu) on Monday, up 12.9% from the lowest on May 16 at .0 20.02.
Benchmark Dutch TTF futures ended at 84.75 euros on Monday, down 19.3% from the recent high of 105 euros on 12 May.
The conversion of the Dutch contract to mmBtu shows that European markers are still operating a premium on the JKM price, ending at $ 26.55 per mmBtu on Monday, about $ 3.95 more than the JKM benchmark.
Following the Russian invasion of Ukraine on 24 February, the European price premium on JKM reached 7 মার্চ 16.77 per MMBTU on 7 March.
Overall, it appears that Asia’s interest in spot LNG cargo is growing, just as Europe is relaxing somewhat, making it more likely that Asian prices will close the gap between European benchmarks.
There is still a risk that supplies from Russia to Europe will decline if Moscow decides to retaliate against sanctions on its exports of other goods, such as crude oil, refined goods and metals.
(Edited by Stephen Coates)