LNG can solve Europe's gas problems, but it comes at a cost: Russell

The fears that Europe will face a shortage of natural gas this winter are exaggerated. The liquefied gas (LNG), market has already taken steps to prevent any shortage, although at higher prices.

The price of natural gas in Europe reached its highest level in over two years on November 22, when the benchmark contract for the front-month contract, at the Dutch TTF Hub, reached 49.03 euros/megawatt hour. This is equivalent to 14.97 British thermal units per million (mmBtu).

The prices have risen by about 40% since the middle of September amid fears that Russian pipeline supplies will be stopped or further restricted.

The new U.S. sanction against Russia's Gazprombank - the financial institution that some European gas importers still use to make payments - has also caused concern about the future supply.

Prices have been rising due to the early cold weather, the expiration of the transit agreement between Russia and Ukraine at the end the year and the increased demand for gas.

There is no sign that Europe will run out of natural gas. The global LNG market has already adjusted to reflect current dynamics.

Analysts Kpler have tracked the arrivals of 9,16 million metric tonnes of super-chilled fuel in Europe for November.

The total is now up from 7,56 million tons in October, and 6,37 million in September - the lowest monthly total for three years.

The United States is the largest LNG exporter in the world and a pivotal supplier between the Atlantic basin and Pacific basin.

Kpler data shows that Europe will import 4,32 million tons U.S. LNG this November, up from 3,13 million in October. This is the highest level since February.

The Asia-Pacific imports of U.S. LNG is expected to fall to 2,19 million tonnes in November, down from 3,21 million tons in October, and the lowest level since March.

Asia's total LNG imports are expected to fall in November, to 23,13 million tons. This is the lowest level since June, and is down from 24,39 million tons in October.

Price Sensitivity

India, Asia's fourth largest buyer, is expected to import 2.21 million tonnes in November, down 2.36 million from October.

India is one of a group Asian buyers who are price-sensitive. The recent increase in spot LNG prices may act as a brake to the country's demands.

Spot LNG delivery to North Asia The price of mmBtu rose to $14.60 in the week ending November 22, an 11-month record high, up from $13.60.

Price has risen steadily over the last few months, and now stands at $7.30 per mmBtu, up 76% since its low in 2024 of $8.30.

The peak price in 2023 is $17.90 per MMBtu. This was reached in late October, as utilities in Asia stockpiled ahead of the winter.

Current forecasts in North Asia for the winter indicate a colder than normal season, which could boost demand for LNG in major importers China and Japan.

With the likely increase in demand for LNG from Europe, spot prices are expected to continue to rise.

India, for example, is a price-sensitive market.

This is not a sign of a stressed market, but rather that it is working as it should.

These are the views of the columnist, an author for.

(source: Reuters)