BAKU, Azerbaijan, June 18
By Leman Zeynalova - Trend:
Liquified natural gas (LNG) cargoes may drift apart from Europe, thereby giving boost to pipeline imports, Trend reports with reference to Eurogas association.
“After declining in early 2010s as European gas demand fell sharply, LNG imports began to recover, initially as European demand recovered, and then rose sharply in 2019 as more LNG supply came on to the market and Europe, with its abundant storage was able to absorb the rising supply. The surge in supply came almost totally from North America (the US) and Russia (Novatek’s Yamal LNG project). New sources of supply from the US means that more LNG is readily available to the European market from Atlantic Basin sources. However, as LNG is traded on a global market with flexibility of supply, it is available to any market when their demand increases. This may ‘pull’ LNG cargoes away from European markets to those offering higher prices, with the European market replacing the ‘lost’ supply through increasing pipeline imports or, initially, taking additional gas from storage,” Eurogas said in its latest report.
The association says this was seen most acutely in December 2020/January 2021 where extreme cold weather in Asia, coupled with LNG supply cutbacks from some LNG supply sources, drove Asian prices to high levels.
“Gas prices in Europe at that time rose marginally, but not to the levels experienced in Asia, so LNG cargoes destined for Europe were diverted to the higher value Asian market. Europe ran down gas in storage to offset the decline in LNG imports. Effectively European gas storage was used to supply Asia’s higher gas demand, reversing the large storage injection in 2019. By its nature the European gas market, with 78 per cent of gas consumption based on Gas on Gas (hub) pricing, is flexible enough to manage its sources of gas and LNG through price. Increasingly the LNG market is becoming global with close interlinkages between Europe and the key demand Asian region with the destination of marginal cargoes being determined by the regional ‘spot’ price. LNG imports into Europe therefore reflect changing global demand patterns and periods of supply surplus and tightness,” the report reads.
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