The once flexible LNG supply Europe had access to is now destined for Asia.
LNG sendout in Europe in 2010 and 2011 forced European gas markets into a supply overhang that persists today and threatens to force marginal LNG supplies to Asia. LNG suppliers have flocked to Asia to avoid the U.S. and European supply glut and there is a clear danger that supplies may not return soon, even under extreme market conditions.
Warm Winter Forces LNG Out of Europe reveals that the once-flexible LNG supply Europe had access to is now destined for Asia. Looking forward, Europe will need to rely on the traditional pipeline suppliers for its gas supply needs. Removing a large and flexible supply source such as LNG is likely to decrease European security of supply, and could pose a challenge to the market if normal weather or improved economic growth drives up consumption. With this scenario, European benchmark prices could easily rise to crude-linked prices in an effort to attract LNG back to Europe.
This Market Alert details how European market dynamics are now driving marginal LNG supplies toward Asia, with increasingly less likelihood that volumes of non-contractually bound LNG will end up in Europe over the foreseeable future.