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European liquefied natural gas (LNG) imports are set to hit an all-time high in March, as the region absorbs global oversupply at a time of declining demand, Kallanish Energy reports.
According to experts at the IHS Markit LNG Research Service, total LNG deliveries to Europe are expected at nearly 11 million tonnes (Mt), which is 14% higher than the pervious record set in December.
It will be the first time that Europe imports the equivalent, or more than South Korea and Japan’s combined LNG imports in a month, IHS Markit said.
Domino effect
“The record in LNG deliveries to Europe is a domino effect from the demand impacts of the coronavirus pandemic,” said Michael Stoppard, chief strategist for global gas at IHS Markit.
“Asian buyers are reselling volumes purchased from the U.S. and portfolio sellers are offloading their excess cargoes as well. This all comes as European gas markets are already in extreme distress,” he added.
The increase in purchases is seen mostly in northwest Europe, with Asian buyers passing on their excess U.S. volumes into Belgium, UK and France. By month-end, imports into the UK and France will be around 2Mt each and Belgium over 1Mt.
Meanwhile, Eastern Mediterranean buyers that had been absorbing large spot volumes through the winter are showing signs of slowing down their imports.
Chain reaction
This unprecedented surge of LNG supply to Europe is certain to cause knock-on effect, warned Shankari Srinivasan, vice president, gas and power, IHS Markit.
“Storage inventories will build up earlier than normal and that will put additional downward pressure on prices in the third quarter and winter delivery months. It is a chain reaction,” said Srinivasan.
The analysts estimated that the EU and UK underground storage facilities were 55% full as of 25 March. This is 21 points above the five-year historical average.
