A severe tightening of the global LNG market resulted in a considerable drop in European imports during July, with seasonably low physical receipts falling by a further third both year on year and month on month.
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According to data from S&P Global Platts Analytics, import levels are very close to those seen in January when Asian spot LNG prices hit record highs, despite the Platts JKM benchmark currently holding a narrower premium over Europe.
Across Europe's liquid traded hubs with LNG regasification terminals, namely France, Spain, Italy, Belgium, the UK and the Netherlands, monthly imports amounted to just 3.12 million mt, equating to 4.306 Bcm of natural gas.
This is the third-lowest monthly import volume since March 2018 that followed the "Beast from the East" weather event, with many market participants now drawing parallels between the two gas summers amid low European inland storage inventories and tight global LNG supply. Both led to multi-year highs in front-season prices, with this year's front winter currently the highest on record.
July receipts were also just 416 million cu m of gas equivalent higher than they were in January. An all-time front-month record for the JKM front month of $32.494/MMBtu was set on Jan. 12, after quickly building up a premium from H1 December 2020.
Comparing prices in the two windows, the July-delivery JKM averaged $10.924/MMBtu, rising by a sixth intramonth to $12.125/MMBtu by expiry, while the UK NBP July contract averaged $9.998/MMBtu, rising by a third to $11.97/MMBtu.
The January JKM nearly doubled during its time as the front month to $12.404/MMbtu by expiry, after setting a $8.173/MMBtu mean. The January NBP rose by a third as the front month to $7.739/MMBtu after averaging $6.369/MMBtu.
While the record JKM price was set for February delivery, Europe still received slightly higher supply than the January that preceded it. This was predominantly due to lengthy lead times for chartering during a peak demand period.
With August delivery being a summer delivery period, Europe may not have this saving grace, although August averages seem to be improving prospects, with average August JKM holding a premium of just 59.2 cent over the UK at $12.959/MMBtu.
However, the July pattern of global shipments showed global demand has tightened to such an extent that Europe's record gas prices may still not be enough aid restocking efforts ahead of winter.
Regionally, the month's biggest change was in the UK, where just one LNG shipment was received throughout July. This was a 158 million cu m cargo from Qatar into the South Hook terminal, where the minimum 5 million cu m/d send-out has been extended into August, early nominations have indicated.
This may be surprising given that maintenance work on oil-export routes were extended, meaning domestic production was not at full strength between late May and late July.
However, the UK has not exported much to Continental Europe this summer, which it would ordinarily have done at this time of year. This is due to a structural change in the cost of making these exports that shippers are struggling to justify covering.
After US volumes had already detached from the UK, shipments from Qatar and Russia's Yamal facility followed suit in July. Aggregate exports from these countries to Europe dropped in July, as did Nigerian output, representing the vast majority of the monthly slump in import. Consequently, deliveries to Belgium, Spain and the Netherlands also dropped month on month.
Global exports from the US came to 7.461 Bcm of gas equivalent during July, with only 10.2% of these volumes shipped to Europe. It dispatched just over a fifth of its shipments to South America and customers in the Caribbean, with the former beset by low hydro-power stock levels and frequently outbidding Europe for volumes.
Qatari volumes are now also helping South America, with 609 million cu m dispatched there out of a 9.641 Bcm monthly exports. The world's largest producer shipped just 11.6% of its total monthly output to Europe, with Asia overwhelmingly the destination of choice.
Another significant development saw Yamal-sourced cargoes begin to use the Arctic Sea route for the first time this year. Europe captured 60% of Yamal's 1.997 Bcm output in July, after making a clean-sweep in June. Yamal production will be partially curtailed in August due to maintenance until the second half of the year.
Intriguingly, it was reload patterns that were the most revealing aspect of the current global picture. At a time when Europe desperately needs to restock, liquefaction from terminals amounted to 700 million cu m of gas equivalent in July.
Belgium's Zeebrugge LNG facility shipped volumes of Yamal origin to Taiwan, Kuwait and Singapore, while France and Spain each shipped a cargo to India, while also reloading single shipments to Taiwan and Puerto Rico, respectively.
The Dutch Gate LNG terminal also sent a small customary shipment to Sweden, although the other July reload destinations have very seldom appeared in data as target markets.
Indeed, most surprising of all was a shipment from Greece which landed at the French Fos Cavaou facility on July 5, underlining the growing anxiety of purchasers reflected in record-high European prices, and the lack of availability as other nations seek to outbid Europe.