Europe Draws More LNG as Hormuz Crisis Tightens Global Market

(Bloomberg) — European imports of liquefied natural gas (LNG) are increasing as the Northern Hemisphere winter approaches. Ongoing disruptions in the Strait of Hormuz are likely to heighten global competition for this essential fuel.

Currently, LNG deliveries to the European Union and UK are about 4% lower than last year based on a 30-day moving average. However, these imports have risen since early August, when they were down 30% compared to last year. This data comes from vessel tracking compiled by Bloomberg. In contrast, LNG shipments to Northeast Asia have decreased during the same period.

Traders indicate that the current price difference for US LNG favors Europe over Asia, encouraging shipments to stay in the region through October. It's expected that Europe will account for roughly 25% of global LNG supplies in September, up from less than 19% in July, according to Kpler.

The ongoing shortage of LNG from the Persian Gulf, which used to provide about 20% of global supplies before the Iran war, has pushed prices to their highest levels since late 2022. This tighter market increases competition between Europe and Asia, which are the world’s largest buyers, for the same flexible supply from the US and other sources.

One emerging competitor for Europe is India, where the demand for LNG is growing due to dry weather affecting hydropower generation and higher gas needs for fertilizer plants. Imports are expected to increase by 10% in September compared to the previous year, according to Kpler. Indian buyers are actively securing spot cargoes, even at prices above their usual buying range.

Since 2022, Europe has ramped up LNG imports to replenish its stockpiles and meet the higher demand during winter after Russia’s invasion of Ukraine forced buyers to find replacements for pipeline supplies from Moscow.

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• Asian LNG prices are currently around $25-$26/mmbtu due to continuous demand from India and some Southeast Asian buyers, according to traders.
• Indian Oil has bought an LNG cargo on a DES basis for delivery between late October and early November at around $26/mmbtu.
• PetroVietnam Gas is looking to acquire an LNG cargo on a DES basis for delivery to the Thi Vai terminal in southern Vietnam from October 23-30.

Drivers:

• If Qatar can increase its output and exports from the Gulf in the coming weeks and prioritize deliveries to buyers in South Asia, spot LNG prices could see a decline, says BloombergNEF analyst Han Wei.
  • “However, buyers may remain cautious, as progress could be halted if tensions escalate again, as seen in previous months,” he noted.
• The LNG tanker Elisa Aquila, which was thought to be headed to Europe from the US, changed course last week and is now heading southwards, according to Bloomberg's shipping data.
• As of September 23, European gas-storage levels were approximately 70% full, compared to a five-year seasonal average of about 86%.
• China's 30-day average for LNG imports on September 27 was 167k tons, approximately 12% lower than the same period last year, based on ship tracking data.
• Estimated flows to all US export terminals were around 19 bcf/day on September 27, marking a 3.5% week-on-week increase, according to BNEF.

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