LNG is unlikely to save Europe this winter

Alexey Belogoryev, Deputy Principal Director on Energy Studies of the Institute for Energy and Finance, commented to the PRIME news agency on whether the growth in LNG supplies to European consumers will help balance the situation on the energy market this winter.

According to Belogoryev, the era of the so-called "Asian prize" seems to be receding into the past, which was noticeable already in 2019-2020, when gas prices were extremely low.

“But even now, spot prices on European hubs are not much different from Asian ones. Moreover, it is highly probable that European prices are following Asian ones (despite complex discussions about the significance of the imbalance in the European market and Gazprom's actions). The main center of international pricing is located in Northeast Asia (China, Japan, Republic of Korea), since it is here that the balance of the world LNG market is determined,” he said.

According to Belogoryev, LNG prices in Asia in the fourth quarter will be higher than in the third. "The general expectation is that the average quarterly prices will increase significantly and may exceed even $ 28 per MMBtu, while in the third quarter JKM reached $ 17," he said.

At the same time, in January-March 2022, on the contrary, there is reason to expect a sharp decline in prices, especially if the winter in the northern hemisphere does not turn out to be cold again, the expert added.

“Despite the fact that spot prices in Asia and Europe have almost equalized, hence the moderate increase in supplies to Europe, demand in Asia is growing too fast for, given the limited supply (including US LNG), significant volumes could be redirected to Europe", - Belogoryev says.

To saturate the European market, given the gas reserves in European UGS facilities are below the average five-year values, it is necessary to significantly increase the supply of Russian pipeline gas, he concluded.