However, weak demand in Asia has kept the S&P Global Platts JKM contract -- the benchmark for spot-traded LNG delivered to Northeast Asia -- subdued, with a sizeable number of LNG cargos now approaching European shores, attracted by higher prices.
European regasification hit record levels in mid January, with LNG sendout in Belgium, France, Italy, the Netherlands, Poland, Portugal, Spain and the UK rising to 451 million m3 on the Jan. 19 gas day, the highest ever level, data from Platts Analytics and the National Grid showed.
LNG regasification averaged 363 million m3/d over the Jan. 1-19 gas days, an increase of 142% on the year and higher than the 351 million m3/d seen in November 2019, the current record month for LNG regasification in Europe.
Change in dynamics
Strong netbacks driven by record-high prices in end-user markets in Europe and Asia last fall and during early winter incentivized exporters, especially in the US, to stretch capacity to the limits to produce more LNG.
When inter-basin spreads turned negative and shipping rates fell sharply, many of those cargoes were pointed or diverted to Europe from Asia.
The spread between the JKM and the TTF is often used as a sign of arbitrage potential between the Atlantic and Pacific basins.
Entering the new year, relatively mild winter weather in Europe and Asia led to a decline in demand.
The slots in Europe for prompt cargoes - those to be delivered in February - suddenly became elusive.
Platts Analytics' EMEA LNG Team Lead Luke Cottell said:
- It is also a reflection of newly discovered elasticity in Asia-Pacific demand, with unprecedented tightness in Europe forcing it to price at a level that competes for flexible LNG, leading to switching and outright destruction of gas demand in spot exposed Asian importers
- Strong LNG sendout and seasonally normal temperatures have weighed on TTF balance-of-winter market prices, helping to offset low Russian pipeline supply
Strong LNG deliveries to Europe may continue on the back of weak buying activity in Asia, according to Cottell.
On the prompt, the TTF front-month is at an ample premium to the JKM while DES Northwest Europe sits at a substantial discount to TTF front-month, pointing to strong demand for regasification capacity.
This was the lowest GCM has been since Nov. 1, 2021.