Global LNG Prices Face Winter Pressure as EU Stocks Lag
Global LNG prices could face renewed upward pressure this winter as Europe enters the heating season with unusually low gas inventories while Asian buyers compete for limited alternative supplies.
What Readers Should Know
- European Union natural gas storage was approximately 67% full, unusually low for this time of year.
- EU officials have indicated that storage around 80% would be sufficient to support winter supply security.
- Shell estimates Middle East disruptions have removed about 36 million metric tons of LNG supply from the global market this year.
- Asian spot LNG prices have risen from around $10/MMBtu before the conflict to close to $30/MMBtu.
- Wood Mackenzie said prices could reach $40/MMBtu if Europe and Asia experience an unusually cold winter.
Europe Enters Winter With Low Gas Inventories
MONTREAL (Oil Monster): Global liquefied natural gas markets could face renewed price pressure this winter as Europe enters the heating season with historically low gas storage levels and North Asian buyers compete for available cargoes.
Industry executives speaking at the Gastech conference in Bangkok said European gas inventories are significantly lower than normal for this time of year, leaving the market more exposed to cold weather and further supply disruptions.
European Union natural gas stocks were approximately 67% full. EU officials have previously indicated that storage around 80% would be sufficient to help secure supplies through the coming winter.
Middle East Disruptions Remove LNG From Global Market
The tighter storage position comes as the Iran conflict continues to restrict LNG exports from Qatar and the United Arab Emirates through the Strait of Hormuz.
Shell estimates that the disruption has removed approximately 36 million metric tons of LNG supply from the global market this year.
Shell President of Integrated Gas Cederic Cremers said Europe is entering the end of fall with historically low storage levels.
Asian Spot LNG Prices Approach $30/MMBtu
Asian spot LNG prices have already risen sharply as Middle East supplies remain constrained.
Prices are now close to $30 per million British thermal units, compared with around $10/MMBtu before the conflict.
The increase has weakened demand in several Asian markets, allowing some LNG cargoes to move toward Europe instead.
Cold Winter Could Push LNG to $40/MMBtu
Wood Mackenzie Chairman Simon Flowers warned that an unusually cold winter could push LNG prices to approximately $40/MMBtu.
He said there is very little spare supply available, meaning colder-than-normal weather could severely test the market.
Prices at that level would likely result in further demand destruction, particularly among more price-sensitive LNG buyers.
Europe and Asia Could Compete for U.S. LNG
European buyers could also face stronger competition from North Asia for U.S. LNG cargoes if temperatures fall sharply in both regions.
Industry executives said a cold winter combined with continued restrictions on LNG movements through the Strait of Hormuz would increase competition for flexible U.S. supply.
The roughly 45-day shipping journey from the United States to North Asia could, however, limit how quickly Asian buyers can secure additional cargoes.
Weather Remains the Key Winter Variable
The outlook remains heavily dependent on temperatures during the coming heating season.
A warmer winter could keep LNG prices elevated but closer to current levels, while a colder winter would increase heating demand at a time when spare global supply remains limited.
With the Strait of Hormuz expected to remain constrained through year-end, market participants are likely to continue watching European storage levels, Asian demand and U.S. LNG availability closely.
Also Read
International LNG Prices Rise Amid Strait of Hormuz Closure
Explore More on OilMonster
Courtesy: www.reuters.com