As oversupply in the LNG market eases and prices recover, there has been a sharp decline in LNG deliveries into NW Europe. The charts show the fall in UK & French LNG sendout volumes since May 2020. Regas terminal send out volumes in these two countries are an important barometer of the volumes of surplus cargoes that are being monetised at NW European hubs. Keep an eye on these terminals into winter as an indicator of the LNG market supply & demand balance.

Last winter saw new records set for LNG imports, as surplus cargos continued to flow into European hubs. The Covid demand shock saw that continue into Q2, but imports have fallen since June. Three reasons have contributed: (i) shut in of US export volumes has eased the cargo surplus since Q2 (ii) spot Asian LNG demand has recovered into Q3 (iii) there have been some significant supply outages e.g. 8mtpa across Gorgon & Prelude in Australia. LNG import volumes will be a key barometer for European gas market pricing into winter.

Gazprom has been very successful in boosting gas exports to Europe across the 2017-2019 period.  This came at a cost in 2019 as high Russian flows and large volumes of surplus LNG coincided, driving European hub prices ~50% lower across the year. Europe has absorbed large volumes of surplus LNG again in 2020, but Gazprom’s strategy has changed.  The chart shows a substantial year on year decline in Russian imports so far in 2020, mostly via the Ukraine/Slovak swing route. We are watching closely to see if Russian flows follow prices higher as the Covid recovery takes hold.