According to ship-tracking data, imports of liquefied natural gas (LNG) by the European Union (EU) have reached their lowest level in nearly two years. In July, LNG deliveries experienced a 7% decline compared to the previous year, with shipments totaling 8.6 million tons. This is the lowest level since November 2021. The decreasing imports can be attributed to a significant decrease in the benchmark gas prices in the region, which have fallen by more than 80% during this period. As a result, traders have redirected supply to Asia, where gas rates are higher, or have chosen to wait for prices to rise again.
The decline in European gas prices is exemplified by the front-month futures at the TTF hub in Amsterdam, the benchmark for gas trading in Europe. On Wednesday, the prices stood at approximately €28 ($31) per megawatt-hour (MWh), which is a significant decrease from around €200 ($220) per MWh a year ago. In contrast, the spot LNG prices in Asia have been on the rise due to heatwaves in Japan, South Korea, and parts of China. The average price for September delivery to northeast Asia reached almost $11 per million British thermal units on Tuesday, equivalent to $38.5 (€35.1) per MWh.
The EU had turned to LNG imports to compensate for the loss of pipeline gas supply from Russia, resulting in a boost of over 60% in imports. The United States remains the EU’s largest supplier of LNG, followed by Qatar and Russia. Additionally, EU countries currently have above-average stockpiles of gas, with storage sites over 85% full as of July 31, according to data from Gas Infrastructure Europe.
However, as the EU prepares for the winter season, Bloomberg suggests that it may need to raise gas prices in order to attract shipments away from Asia. The EU’s lower LNG imports could potentially lead to a gas shortage risk during the winter season.
In conclusion, the EU’s LNG imports have reached a two-year low due to falling gas prices in the region. Traders have redirected supply to Asia or have chosen to wait for prices to rise again. The EU’s reliance on LNG imports has increased since the loss of pipeline gas supply from Russia. While EU countries currently have sufficient gas stockpiles, there may be a need to raise prices in order to secure shipments during the winter season.
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