For the first time in ten months, Europe’s imports of liquefied natural gas rose in October from the previous month as it moved to fill its gas storage sites for the winter in which the transit deal for Russian pipeline gas flows via Ukraine expires.
The rare October jump in LNG imports was largely due to buyers stocking up on the fuel at steady prices at the end of the summer, while Asia’s LNG imports slightly fell last month, likely due to lower Chinese purchases, per data from commodity analytics firm Kpler cited by Reuters columnist Clyde Russell.
Although Asia’s October LNG imports fell from September, they rose compared to a year ago. Asian imports have also jumped year to date compared to last year, while Europe’s have slumped, in a sign that the industry has been struggling and shifting away from gas. The milder 2023/2024 winter also played a role in Europe’s lower LNG imports this year compared to 2023.
Once again at the mercy of the winter weather, Europe took advantage of steady prices in August and September and ordered more LNG cargoes for October delivery to top up natural gas storage sites.
The EU’s gas storage sites are 95% full, while the 90% target was reached well ahead of the EU’s self-imposed binding November 1 deadline.
However, gas in storage wouldn’t cover Europe’s needs for winter, and the volumes of gas in storage were slightly lower at end-September compared to the same time last year.
European prices rose in the past few weeks amid concerns about supply as tensions in the Middle East flared up and unplanned outages in Norway – Europe’s single biggest gas supplier – made traders anxious about risks to supply.
Additional supply concerns arise from the fact that the Ukraine-Russia deal on the transit of Russian gas to Europe through Ukraine ends on December 31, 2024.
The higher benchmark prices in Europe of the past weeks have attracted more LNG cargoes, and this could be the reason why Europe’s LNG imports rose in October from September.
European LNG imports increased to 7.54 million metric tons last month, up from 6.37 million tons for the previous month and the higher monthly import level since May, per Kpler data quoted by Reuters’s Russell.
In contrast, Asian LNG imports fell slightly to 24.36 million tons in October, down from 24.72 million tons in September and the lowest since July, the Kpler data showed.
Year-over-year, Europe’s October imports fell from October 2023, while Asian LNG imports rose as Asia continues to be the driver of global LNG and natural gas demand growth.
Year-to-date to October, Europe’s imports slumped by 20%, while Asia’s LNG imports rose by 10.3%, according to the Kpler data.
China’s LNG imports are estimated to have slightly declined in October from September, possibly also because of gas storage nearing capacity.
In a major shift in the Chinese transportation sector, LNG demand is pushed up by the soaring sales of LNG-fueled trucks, which have displaced some of the country’s diesel demand.
“China has been implementing various policies to promote LNG trucks and restrict diesel trucks as part of its efforts to reduce air pollution and lower carbon emissions, including encouraging re-fuelling infrastructure,” Shiqing Xia, Consultant for Oils and Chemicals at Wood Mackenzie, said earlier this year.
“Low natural gas prices have also helped in making the switch to LNG-powered vehicles more attractive.
China, which has surpassed Japan in recent years to become the world’s largest LNG importer, will be a key growth driver of global LNG demand growth, industry analysts and major LNG traders say.
For example, Shell, the world’s top LNG trader, expects global LNG demand to surge by 50% by 2040, driven by higher demand from Asia, with coal-to-gas switching in China and a boost in LNG consumption to fuel economic growth in South and Southeast Asia. The global LNG market is set to continue growing into the 2040s, largely driven by China’s industrial decarbonization and strengthening demand in other Asian countries, Shell said in its annual LNG outlook earlier this year.
Asia’s AI technology and data centers are also set to drive LNG demand higher in the coming years.
By Tsvetana Paraskova for Oilprice.com
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