Recent months have seen a significant decrease in U.S. liquefied natural gas (LNG) exports to Europe. With natural gas stores approaching full levels and higher prices in Asia attracting cargoes, Europe’s share of U.S. LNG exports has dropped. According to ship tracking data from Kpler, only 45% of U.S. LNG exports were destined for Europe last month, compared to a 65% share in May and 52% in June.
This shift in the direction of U.S. cargoes could have a major impact on European natural gas prices, which have largely remained low due to ample supplies from the United States. As Europe enters winter and demand for heating increases, a decrease in supply could exacerbate the seasonal increase in prices.
Interestingly, Asian imports of U.S. LNG are now almost equal to those of Europe. Last month, the U.S. exported 2.6 million metric tons of LNG to Asia, compared to the 3.3 million tons to Europe.
While European natural gas prices have been relatively steady in recent months, Asian prices have been on the rise. ING reports that in July, Europe’s natural gas prices were around $2.1 cheaper per million British thermal units compared to Asian prices, whereas in June the discount was 30 U.S. cents.
Analysts from the Dutch bank suggest that the larger discount in the European gas market could redirect more LNG cargoes towards Asia and help reduce the supply glut in Europe.
The increased import of LNG has contributed to the low prices in Europe and has also aided in filling the continent’s gas stores ahead of winter. Data from Gas Infrastructure Europe reveals that European-wide gas stores were nearly 86% capacity as of the end of July, significantly higher than usual for this time of year. Analysts believe that storage tanks could reach full capacity by September, ensuring a sufficient supply cushion for the winter season.
Overall, the declining U.S. LNG exports to Europe raise concerns about potential price increases and supply shortages in the coming months.
