Russell: Asia LNG imports to fall to 22-month low due to Europe's surge in prices
In February, Asia's LNG imports will likely drop to their lowest level in almost two years while Europe's are expected to reach the second highest levels on record.
Buyers are turning away from expensive spot cargoes that have prices that are at least 50% higher this year than they were last year.
The milder than usual winter in much of North Asia also slowed down demand and allowed European buyers the opportunity to bid on cargoes to replenish the continent's depleted stocks.
According to commodity analysts Kpler, Asia is expected to import 20.7 million tons of super-chilled LNG in February.
The February total was 22,67 million, down from 24,59 million in January. According to Kpler, this is the lowest total monthly since April 2023.
The European LNG imports for February are expected to be 11.81 million tonnes, the same as 11.84 million in January.
The imports for these two months were the third and fourth highest on record. However, if the imports of February are calculated per day, they are now the second highest behind April 2023.
After the Russian gas supplies via the pipeline that crosses Ukraine stopped at the beginning of January, Europe has increasingly turned to LNG. This is in addition to the loss of Russian pipeline gas after Moscow's invasion of Ukraine in February 2022.
The United States is supplying a large part of Europe's increasing demand for LNG. In 2023, the United States will surpass Australia as the largest LNG exporter.
In February, Europe's imports of US goods are expected to fall from a record 6,84 million tons in January.
On a daily basis, however, imports in February are at an all-time record and almost three times higher than the 2,30 million tons Europe purchased from the United States last July.
The growing reliance on U.S. LNG by European buyers may help the continent make its case to the new U.S. president Donald Trump who is increasing his tariffs against trading partners in an effort to get them buy more from the United States.
High Prices
The European LNG demand also helps to drive the spot price of the fuel close to the European benchmark TTF, which ended on February 21 at 46.06 euro per megawatt-hour (mmBtu), or $14.12 per million British Thermal Units.
The price is still lower than the spot Asian LNG rate of $14.00 per mmBtu
The prices for spot cargoes have decreased in Asia as demand has decreased, and also because the high prices which were prevalent since November reduced demand.
China is the largest LNG buyer in the world. Imports are expected to be at their lowest level in two years in February.
According to Kpler, February's arrivals will be 4,99 million tons. This is down from 6,05 million in January, and 5,82 million last February.
Since mid-November the Asian spot price for mmBtu has been around $14, making it difficult for Chinese utilities sell at a profitable level.
A mild winter will have a greater impact on Japan, which is the second largest LNG importer in the world. February's arrivals are expected to be 5,79 million tons. This is down from 6,74 million tons in January, and well below the 6,07 million tons from February 2024.
The winter season is over, and it's expected that North Asia will experience a seasonal drop in demand for LNG. However, the current high prices may make the dip larger than normal.
Spot prices will likely remain high if Europe's LNG consumption remains high as it works to replenish its storages.
These are the views of the columnist, an author for.
(source: Reuters)
