European LNG demand surges as Russian supplies dwindle
Tankers carrying liquefied natural gas (LNG) are increasingly changing course in the Atlantic and heading to European ports. This shift results from growing gas demand in Europe, triggered by the loss of Russian pipeline supplies through Ukraine and cooler weather, reports "Financial Times".
According to data from ICIS, at least seven LNG tankers, initially destined for Asia or Colombia, have changed direction and are now heading to Europe. These changes underscore the dynamic nature of the gas market, which has been undergoing significant transformation since the war in Ukraine began in 2022. Russia halted gas flows through Ukraine, contributing to the expiration of a key transit agreement and forcing Europe to seek alternative supply sources.
The economic viability of LNG supplies to Europe
Data from Spark Commodities indicates that sending LNG to Europe in January yields a profit of up to $5.3 million more per shipment compared to deliveries to Asia, where demand remains low. This makes Europe an attractive market for LNG suppliers, especially given the high TTF futures prices, which reached 50 euros (52.5 dollars) this week.
Two of the redirected tankers are currently heading to Turkey, from where the gas can be transmitted by pipelines to southeastern Europe, a region most affected by the end of Russian supplies through Ukraine.
Europe increasingly reliant on LNG
According to Gas Infrastructure Europe, European gas storage was filled to 59% as of January 15, which is 15% less than a year ago. The International Energy Agency (IEA) forecasts that the reduction in Russian pipeline gas supplies will lead to a 15% increase in LNG imports to Europe.
"The global gas market balance remains fragile," stated the IEA in its report. Although the halt of Russian supplies through Ukraine does not directly threaten the EU's energy security, it could increase reliance on LNG and affect prices in the longer term.
According to "Financial Times", forecasts from Energy Aspects suggest that by the end of March, gas reserves in Europe could fall to 1.34 trillion cubic feet, approximately 35% of total storage capacity. It is estimated that by the summer of 2025, as much as 35% of stockpiles will come from LNG.
Any major disruption to global LNG supply or a slow ramp-up of the new export facilities coming online in the US or structural growth in Asian demand could undermine this stock build – warns James Waddell from Energy Aspects.
