Europe’s near-term natural gas supply glut means more fuel for Asia this winter.
Liquefied natural gas (LNG) suppliers are already looking to redirect shipments to Asia for delivery from November onward due to more attractive prices, according to traders with knowledge of the matter. Asia LNG spot prices jumped above the European gas benchmark for the first time since June earlier this week.
This is a reversal: For much of the year, Europe had been frantically hoarding LNG supply as a means to replace a drop in Russian pipeline gas deliveries. That was leaving less fuel for top Asian importers, like Japan and South Korea, as higher gas prices in Europe attracted more cargoes to the continent.
Now, a combination of unusually warm weather in Europe and successful bidding for cargoes means facilities are almost full before winter. There is too much LNG in Europe and not enough import terminal capacity, putting pressure on spot prices in the region and prompting traders to look to reroute deliveries to Asia.
The additional LNG supply to Asia will likely help to ease winter shortage fears, especially amid forecasts for colder weather in Japan. China’s government also told the nation’s state-owned importers to stop reselling LNG fuel as a measure to prepare for the winter.
LNG prices are still too high for some of Asia’s emerging nations, like Pakistan and Bangladesh, which have struggled to procure fuel since Russia’s invasion of Ukraine upended markets.
To be sure, LNG shipments could shift back to Europe if there is a sudden cold snap. Frigid weather would quickly see Europe dipping into its stockpiles, again boosting competition with Asia for spare LNG deliveries.