LONDON—Shipments of U.S. LNG have gathered pace in March and Europe is set to stay a top destination for spot cargoes with Asian prices still too low to ship the chilled fuel that far.
But winter demand for gas is fading, while steady supplies of gas and LNG have kept inventories well stocked, depressing European gas hub prices. This has raised the question: how many more cargoes can Europe absorb?
Suppliers of U.S. LNG have loaded 14 cargoes so far in March, setting a faster pace than February when 29 cargoes were loaded in the whole month as storms and maintenance hampered output.
Asia remains the leading destination for cargoes shipped under long-term LNG supply contracts. But Europe and Mexico are, for now, more attractive destinations for spot cargoes.
European gas hub prices trade at a discount to Asian spot prices, but the discount needs to be more than $1 per million British thermal units (MMBtu) to cover the cost of shipping the fuel the extra distance to Asia from the U.S. Atlantic coast.
The Dutch gas price, the benchmark for West European prices, was about $5.60/MMBtu on March 7, compared to about $5.80 for a spot cargo of LNG in Asia.
Netbacks, a calculation showing how much LNG sellers can get for their cargo at various destination points, also show that Britain and other European destinations have become more attractive markets than Japan and other Asian destinations.
For Mexico, spot LNG fills the gas shortfall resulting from pipeline constraints. As a neighbor to the United States, LNG shipping costs are also low.
Some LNG traders have said the arbitrage to Asia will remain closed until at least September, when Asian demand typically picks up due to the need to restock inventories before winter.
The spread between the Asian JKM forward curve and Dutch gas hub prices is not expected to exceed $1/MMBtu until August.
Recommended Reading
Exxon Slips After Flagging Weak 4Q Earnings on Refining Squeeze
2025-01-08 - Exxon Mobil shares fell nearly 2% in early trading on Jan. 8 after the top U.S. oil producer warned of a decline in refining profits in the fourth quarter and weak returns across its operations.
Phillips 66’s NGL Focus, Midstream Acquisitions Pay Off in 2024
2025-02-04 - Phillips 66 reported record volumes for 2024 as it advances a wellhead-to-market strategy within its midstream business.
Rising Phoenix Capital Launches $20MM Mineral Fund
2025-02-05 - Rising Phoenix Capital said the La Plata Peak Income Fund focuses on acquiring producing royalty interests that provide consistent cash flow without drilling risk.
Equinor Commences First Tranche of $5B Share Buyback
2025-02-07 - Equinor began the first tranche of a share repurchase of up to $5 billion.
Q&A: Petrie Partners Co-Founder Offers the Private Equity Perspective
2025-02-19 - Applying veteran wisdom to the oil and gas finance landscape, trends for 2025 begin to emerge.