Ships carrying LNG to Asia turn around in the middle of the route and change course to Europe, as users there are willing to pay more for gas due to soaring prices than Asians, writes The Financial Times.
The publication notes that during the year China, Japan and South Korea were ahead of Europe in the supply of LNG, which was used at power plants. Now the storage facilities in the Asian region are full and ship owners are deploying them in order to make money on rising prices in the European market.
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Director of Platts LNG Ciaran Rowe told the newspaper that now the difference between European and Asian gas prices has reached a maximum. According to the FT, spot supplies to Europe were estimated at about $48.5 per million British thermal units (BTU), while in Asia they were $41 per million BTU.
Due to the intensifying energy crisis, Europe is becoming a more attractive market for gas suppliers than Asia. Traditionally, the gas market talks about the "Asian premium", that is, a situation where the supply of liquefied natural gas (LNG) to China, Japan and other countries of the Far East is more profitable due to higher prices in the Asia-Pacific region. But now the Asian premium no longer affects spot prices in Europe, since the European premium has been formed, Deputy Director General of the National Energy Security Fund Alexey Grivach drew attention.
According to the Platts index, on December 20, 1,000 cubic meters of gas on the Asian market cost $1,611. At the same time, spot gas prices in Europe still exceeded the psychologically important milestone of $2,000 per 1,000 cubic meters, updating the record from October 6, when quotes were very close to this mark. According to the ICE exchange, on December 21, the value of the January futures on the Dutch TTF hub rose to $2,224 per 1,000 cubic meters, although then it was adjusted to a level just below $ 2,200.
Raiffeisenbank analyst Andrey Polishchuk believes that the price rally in Europe was primarily caused by a record increase in gas demand, primarily in the Asian market. "With the development of LNG, the gas market is becoming more global, suppliers are losing infrastructure constraints, so gas is supplied to places where its prices are higher," the expert stressed. He recalled that the increase in gas prices in 2021 began precisely from the Asian market, in particular from China, which, in turn, led to a reorientation of supply from Europe to Asia.
The level of reserves in underground storage facilities (UGS) in Europe also continues to fall. According to Gas Infrastructure Europe (GIE), as of December 19 (latest data), 64.5 billion cubic meters of gas were in storage (59% full). Last year, 86 billion cubic meters were stored in UGS on the same date.
Spot quotes for gas on TTF have been rallying since mid-December, as a rule, on negative news. Prices are pushed up either by uncertainty about the timing of certification of the Nord Stream – 2 gas pipeline, or by problems in the European energy sector (for example, a day earlier prices reacted to the shutdown of one of the French nuclear power plants). In particular, on December 16, the head of the German Federal Grid Agency, Jochen Homann, said that the issue of certification of Nord Stream 2 operator Nord Stream 2 AG would not be resolved until mid-2022. Against this background, TTF prices increased by more than $ 120 per 1000 cubic meters. m.
Grivach agrees that the price growth in Europe is influenced by objective factors - the weather, decisions made by the EU leadership. According to him, the main reason for the record price increase is the uncertainty around the Nord Stream - 2, as well as the lack of long-term contracts, since the EU leadership has been pursuing a policy of refusing to conclude new contracts for gas supplies from Russia over the past 10 years.
On Sunday, Gazprom booked the lowest volume of gas pumping through the Yamal– Europe gas pipeline for a day in advance, buying only 3.8 million cubic meters from Poland out of 89.1 million cubic meters auctioned, Interfax reported with reference to the GSA Platform booking platform. The company also booked 89.1 million cubic meters from Poland for January 2022. m per day is only 19.26 million cubic meters.
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