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Brazil tops importers of US LNG cargoes in October as Spanish deliveries climb

Highlights

Hydro drain, pipeline worries cited for trade flows

Prices in traditional end-user markets stay high

Brazil was No. 1 buyer of US LNG for the third month in a row in October amid severe drought that has drained its hydroelectric resources, while Spain was a close second as pipeline gas supplies faced constraints, S&P Global Platts Analytics data showed.

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The shifting trade flows came as prices in traditional end-user markets in Europe and Asia remained extremely high and congestion at the Panama Canal continued.

Power data from Brazil's National Electric System operator showed that hydro reservoirs remain critically low, with just 37 TWh in the Southeast and Central region at the end of October, over 23% lower than year-ago levels. That suggests that Brazil may remain dependent on US LNG imports through the upcoming winter.

More than two-thirds of Brazil's electricity is generated by hydro, prompting fears of blackouts in Latin America's largest economy. The trends in the recent month came even as much of Brazil saw above average rainfall over the past 30 days, US National Oceanic and Atmospheric Administration data showed.

In Spain, meanwhile, importers in late October nominated zero Algerian supplies for November via the GME pipeline through Morocco. That raised the potential that Spanish natural gas prices could find support heading into winter, providing incentives for spot LNG deliveries even with premiums that have been limiting European cargoes overall. PVB/TTF premiums remained weaker than NBP premiums on Nov. 2, as Iberian inventories looked strong.

Spanish inventories were sitting at over 81% full Oct. 31 but experienced their first inventory withdrawal since April, according to data from Gas Infrastructure Europe.

During October, Brazil received 11 LNG cargoes from the US, one ahead of Spain's 10, Platts Analytics data showed. South Korea received the third-most US LNG cargoes during the month at nine, followed by China at eight and Turkey at seven. Japan, the world's biggest buyer of LNG, received only four US cargoes in October, about a third as many as Brazil.

Total Brazilian LNG imports fell to 13 cargoes in October, five fewer cargoes month-on-month. Domestic gas production and pipeline gas flows from neighboring Bolivia have been insufficient to satisfy its power needs.

Latin American LNG demand this year has been a reason for Europe being priced out of spot LNG imports at times.

The S&P Global Platts DES Northwest Europe for December was assessed at $24.329/MMBtu on Nov. 2, gaining $1.794/MMBtu day on day. The first half of December was assessed at $24.229/MMBtu, and the second half was assessed at $24.429/MMBtu. That maintained the intramonth contango at 20 cents/MMBtu compared with Nov. 1.

Platts assessed the US FOB Gulf Coast Marker on Nov. 2 at $21.75/MMBtu.