Global LNG Prices Could Rise This Winter as Europe Faces Low Gas Stocks

Post by : Saif

Global liquefied natural gas prices could rise sharply this winter as Europe prepares for colder months with unusually low gas storage levels. Industry executives and analysts warned that limited supplies and strong competition from Asian buyers could put additional pressure on the LNG market.

European Union gas storage facilities are currently around 67% full, according to industry data cited at the Gastech conference in Bangkok. This is unusually low for this time of year and remains below the 80% level that European officials have identified as important for winter preparedness.

LNG Supply Faces Additional Pressure

LNG supplies have also been affected by disruptions linked to the Strait of Hormuz. Qatar and the United Arab Emirates have been unable to ship significant volumes of LNG through the waterway, removing millions of tonnes of supply from the global market.

Shell estimates that around 36 million metric tons of LNG supply have been lost this year because of the disruption. This has increased competition among buyers looking for alternative cargoes.

Cold Winter Could Push Prices Higher

Industry executives warned that weather will be one of the biggest factors determining LNG prices during the winter.

Wood Mackenzie chairman Simon Flowers said a colder-than-normal winter could push LNG prices toward $40 per million British thermal units, compared with levels near $30/mmBtu in Asia. Such high prices could also reduce demand as consumers and industries look for cheaper alternatives.

A warmer winter could reduce the pressure on supplies. However, market participants expect prices to remain elevated if LNG shipments through the Strait of Hormuz remain restricted.

Europe and Asia May Compete for US LNG

European and Asian buyers could increasingly compete for US LNG cargoes if temperatures fall sharply in both regions.

Equinor executives said a cold winter in Europe and Asia, combined with continued disruption to Gulf LNG supplies, could force European buyers to compete with Asian customers for US cargoes.

Shipping times could make the situation more difficult for Asian buyers. LNG cargoes travelling from the United States to North Asia can take around 45 days, limiting how quickly supplies can respond to sudden increases in demand.

European Storage Efforts Continue

Germany's state-owned energy company SEFE has already started increasing its gas storage levels as Europe prepares for winter.

European officials have also continued to monitor the situation. The European Commission said earlier in September that there was no immediate risk to the EU's gas supply, despite lower storage levels, citing increased LNG import capacity, diversified supplies and reduced gas demand.

Read more: UAE's ADNOC Launches Unified LNG Marketing and Trading Platform to Expand Global Gas Business

LNG Prices Could Remain Volatile

Asia's LNG spot prices have already risen significantly this year as supply disruptions have reduced availability. Higher prices have also weakened demand in several Asian markets.

Europe may need to attract additional LNG cargoes to rebuild inventories before the peak winter demand period. If several major markets require extra supplies at the same time, competition could push prices higher.

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