This winter, a key energy market will be squeezed, according to experts

Updated: Jul 13

Data indicates that as the West moves away from Russia, LNG demand is anticipated to exceed supply.



According to analysts cited by Bloomberg this week, the liquefied natural gas (LNG) market may see a possibly historic scarcity this winter as nations scramble to get the super-chilled fuel.


The sources claim that the EU's intention to replace piped Russian gas imports by the end of this year with LNG from the US and Africa is drastically escalating competition for heating and power plant fuel.


In a typical year, LNG importers spend the summer stockpiling supplies for the busiest winter period. People with knowledge of the situation claimed that they began refilling inventories earlier this year and warned that the impending supply shortage could result in higher electricity prices and inflation.


In a typical year, LNG importers spend the summer stockpiling supplies for the busiest winter period. People with knowledge of the situation claimed that they began refilling inventories earlier this year and warned that the impending supply shortage could result in higher electricity prices and inflation.


James Whistler, the global head of energy derivatives at Simpson Spence Young, told the media source that "this next winter has everyone on edge." "Everything points to tight supply under normal circumstances, but there are also additional hazards," he continued.


This month, Rystad Energy predicted that by 2022, there will be 436 million tonnes of worldwide demand, exceeding 410 million tonnes of supply.


Meanwhile, merchants are choosing to export LNG to Europe instead of Asia because the rates there are more enticing.


According to Michael Stoppard, global gas strategy lead and special adviser at S&P Global Commodity Insights, "there is no surplus capacity across the global gas complex, putting Europe and Asia in a tug-of-war for the available supply."


Although they have decreased since their peak in early March, gas prices in Europe remain much higher than the seasonal norm. According to experts, the declines may offer regional buyers greater room to restock inventories in the coming months, though much will rely on how soon Chinese demand picks up.


Although analysts anticipate a strong increase in buying later in the year, consumption in Asia's largest economy, which is currently struggling with the COVID pandemic, is still at a low level.


According to Valery Chow, the Asia-Pacific head of gas and LNG research at Wood Mackenzie, "Strong LNG demand in Europe is assured, but the wildcard is China, where current demand remains sluggish given continuous Covid-19 lockdowns and slowing economic growth." As European and North Asian customers fight for volumes, the market will become more constrained as winter approaches, he said.


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