Europe Outbids Asia for LNG as Prices Surge 150%

Spot LNG prices have risen as seasonal demand strengthens and Asian buyers reduce participation in the spot market. Kpler estimates September LNG inflows to Asian countries at 20.09 million tons, down from 22.27 million tons a year earlier and 22.25 million tons in August. That drop in Asian demand is coinciding with a surge in European purchases as the EU seeks to rebuild inventories ahead of winter.

European imports are forecast to climb in coming months, with September flows on track for about 7.98 million tons and October potentially reaching as much as 10.53 million tons, according to reporting of Kpler data. European storage remains well below the five-year average for this time of year, leaving the bloc reliant on additional spot LNG deliveries while other supply sources are constrained.

Market tightness has been intensified by disruptions in Qatari exports: Qatar’s force majeure was earlier estimated by the country’s energy minister to reduce supply by roughly 12.8 million tons per year. QatarEnergy is reported to be seeking U.S. LNG deals through 2031 to offset lost local volumes. The UAE is exporting some volumes from the Persian Gulf but not enough to fully compensate for the Qatari shortfall.

Prices reflect the squeeze. LNG was trading around $26 per million British thermal units in the week to September 11, and spot rates are about 150% higher than in February. Analysts and traders are looking to additional U.S. liquefaction capacity to relieve the tightness, but new capacity is not expected to be an immediate fix. With Norwegian gas at peak, Russian pipeline supplies curtailed by sanctions, and Russian LNG set to face restrictions from January, the EU has limited alternatives and is importing record amounts to secure winter supplies.

Meanwhile, some Asian buyers are pivoting away from the spot market. China is reported to be favoring long-term, oil-linked and fixed-price contracts and using pipeline gas from Russia, reducing its need for spot cargoes. Price-sensitive importers in Asia are more likely to switch back to coal or other fuels if they cannot afford spot LNG, while wealthier buyers, including many European states, are purchasing high-priced cargoes to refill inventories despite the hit to import bills.