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Europe and Asia are facing an oversupply of LNG


April, 19 2023
watermark Economic news

Analyzing the global raw materials market, experts note that it is gradually becoming oversaturated with natural gas, as a result of which in the next few weeks prices for it will decrease both in Europe and in Asia.


Analysts emphasize that such a trend was rare last year, when the conflict in Ukraine led to shocks in the energy markets, and Europe hastened to find as many alternative sources of gas as possible. However, now, against the backdrop of a warm winter and efforts to reduce gas consumption, European countries have replenished their reserves sufficiently, as a result of which LNG tankers can stand idle at sea for weeks. 


As a rule, the demand for gas decreases at the end of the heating season, and then – at the end of summer, with the cessation of heat. After that, the gas mainly enters the storage facilities to prepare for the next season. Analysts note that this year the work on filling UGS in Europe may be completed as early as the end of August.


It is worth noting that in order to reduce dependence on Russian gas, Europe has quickly installed mobile terminals for receiving LNG and next year their number will continue to grow. In addition, global LNG exports rose to a record level in March, including due to the recovery of production in the United States. The additional supply is now helping to lower prices, and traders are struggling to find buyers.


According to analytical agencies, in Spain, the leader in the number of LNG terminals in Europe, the storage facilities are 85% full. This may lead to the formation of an excess of gas in the market, which will affect spot prices. 


A record volume of re-exports is also observed in China, which is slowly recovering after the removal of coronavirus restrictions. South Korea and Japan are also increasing supply offers in order to prevent a surplus in their own market.


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