Natural gas prices in Europe are now worryingly close to those in Asia, with Europe-destined LNG cargoes likely to be diverted to Asia. This may lead to a supply shortage, which could trigger a price spike, resulting in some of the lost supplies being shifted from Asia back to Europe.
On the other hand, China could increase its LNG purchases if the government decides to shake off the COVID-19 shackles. In this case, Europe could face a long-standing shortfall of gas, with the market equilibrium to be restored owing to weaker demand rather than stronger supply. According to the IEA, Europe’s gas consumption declined by more than 10% in the first eight months of this year compared with the same period in 2021.
Growing global competition for supplies could herald tectonic shifts on the gas market. Suppliers are now snapping up all available vessels. According to Bloomberg, Shell has booked the LNG carrier Yiannis for as much as $400,000 per day, likely the most expensive ever for the Atlantic basin, while the Indian firm GAIL also secured the LNG Schneeweisschen vessel for about $360,000 per day.
If this is already happening in the Atlantic, what should we expect next?