Liquefied natural gas prices are climbing on the spot market as seasonal demand strengthens and Asian buyers scale back purchases, leaving European importers scrambling for alternative supplies ahead of winter.
The tightening market is being driven by a widening imbalance between available LNG cargoes and demand in Europe, where gas inventories remain below the five-year average for this time of the year.
According to analysts, LNG inflows into Asian countries are expected to fall to about 20.09 million tonnes in September, compared with 22.27 million tonnes recorded a year earlier and 22.25 million tonnes in August.
The decline in Asian spot-market demand is providing some relief to European buyers, who are increasingly competing for cargoes as they seek to replenish inventories before winter.
European LNG imports, meanwhile, are projected to rise to about 7.98 million tonnes this month and could reach as much as 10.53 million tonnes in October, according to Kpler data cited by Reuters.
The surge comes as the disruption to Qatari LNG exports continues to weigh on the global market. Qatar remains one of the world’s major LNG suppliers, making prolonged disruption to its exports particularly significant for countries that depend heavily on imported gas.
LNG was trading at around $26 per million British thermal units in the week ending September 11, with market participants expecting prices to remain elevated as buyers compete for limited supplies.
QatarEnergy has reportedly been seeking additional U.S. LNG supplies through 2031 to compensate for lost domestic production and meet some of its long-term contractual commitments to international customers.
The United Arab Emirates has also continued exporting LNG from the Persian Gulf, but available volumes are insufficient to fully replace the supplies lost from Qatar.
Qatar’s energy minister earlier estimated that the disruption could remove roughly 12.8 million tonnes of LNG from annual global supply. The resulting gap has intensified expectations that new U.S. LNG capacity could eventually help ease the pressure.
However, new production cannot arrive quickly enough to eliminate the immediate supply problem facing importers preparing for winter.
Europe and Asia are therefore once again competing for a finite pool of LNG cargoes, with European buyers having to pay a premium when necessary to attract supplies that might otherwise head to Asian markets.
The pressure is particularly significant because spot LNG prices have risen sharply from their levels earlier in the year. The increase has created a difficult choice for European importers: pay elevated prices now or risk entering winter with inadequate gas reserves.
Europe’s options for replacing LNG are also becoming narrower. Norwegian pipeline gas supplies are already close to their maximum levels, while Russian pipeline gas remains restricted by sanctions and further restrictions on Russian LNG are expected from January.
Kpler estimates that European LNG imports could exceed last year’s record of 125.20 million tonnes. Imports already reached 117.01 million tonnes during the first eight months of the year, leaving the continent facing potentially heavy additional purchases in the remaining months.
The financial consequences could be substantial. European buyers delayed some storage purchases earlier in the year, betting that the conflict in the Middle East would end quickly and that Qatari supplies would return to the market.
That calculation has become increasingly costly as the disruption has lasted longer than anticipated and LNG prices have remained elevated.
Europe now faces the possibility of buying large quantities of gas at high prices to guarantee winter supplies, only for prices to fall later if additional LNG becomes available. But waiting carries its own risk: a further supply squeeze could push prices even higher.
A similar problem occurred during the winter of 2022, when European energy companies rushed to secure supplies, only for mild weather to weaken demand and send prices lower, leaving companies with substantial losses.
The circumstances are different this year, however. Europe has significantly less access to Russian pipeline gas, meaning that even a mild winter may not provide the same safety cushion that existed in 2022.
China, meanwhile, appears better positioned to withstand the spot-market squeeze. The world’s largest LNG importer has been limiting its exposure to expensive spot cargoes and relying more heavily on long-term contracts, including fixed-price and oil-linked agreements.
China is also benefiting from pipeline gas supplies from Russia, giving Beijing another source of energy at a time when the global LNG market is tightening.
That diversification could indirectly ease pressure on other importers by keeping China from aggressively competing for expensive spot cargoes.
For poorer and more price-sensitive LNG buyers, however, the consequences could be different. Countries unable to absorb the higher cost of spot LNG may increasingly turn to coal and other fuels to generate electricity.
European countries that have reduced their reliance on coal—and Germany, which has also shut down its nuclear power plants—have fewer alternatives available.
The result is a global LNG market entering the winter season with limited flexibility, elevated prices and intense competition for cargoes. For European consumers and industries, the immediate priority is no longer simply buying gas cheaply, but securing enough gas to get through the winter.
