Source:NOS
Sailing across the Atlantic with a set course toward Asia or the Cape of Good Hope, captains of at least seven U.S. liquefied natural gas (LNG) tankers were recently ordered to change direction toward Europe. These sudden course changes come as European buyers are offering higher prices than other regions, making the continent the most attractive destination for LNG shipments. “They receive an email with the new destination, and they turn around immediately,” said energy expert Jilles van den Beukel.
The shift in destinations is driven by Europe’s growing demand for LNG, which has surged since the Russian invasion of Ukraine. A decade ago, LNG imports were relatively minimal, but today they are crucial for heating homes and powering factories across the continent. The global LNG market operates on a dynamic supply and demand model, with gas being sold while en route, and destinations being determined based on the highest bidder.
According to Chris Guth, a market analyst at energy firm Engie, the concept of selling cargoes while in transit is not new. “It’s fascinating, but it’s been happening for years with commodities like grain and coffee. What is new, however, is the extent to which Europe has become dependent on LNG, which now accounts for a third of the region’s total gas supply,” Guth explained.
Van den Beukel emphasized that the market is simply responding to existing conditions. “For various reasons, there’s a shortage of gas in Europe. Recently, even the remaining Russian gas supply has dwindled, and there has been limited solar and wind energy production in recent months. It’s a melting pot of factors tightening the gas market and pushing prices higher.”
While the current situation is not as severe as the 2022 energy crisis, when gas prices soared to over 300 euros per megawatt-hour and consumers were urged to cut heating use, experts believe a smaller-scale version is unfolding. “You could call it a mini-crisis,” Van den Beukel noted.
Despite concerns, Van den Beukel stated that gas supply itself is not the issue, but rather its affordability. “The gas will arrive, but at a cost. If you’re willing to pay a premium, it will come your way. Prices are currently fluctuating between 45 and 50 euros per megawatt-hour—a far cry from 2022 levels, but still impactful.”
Higher gas prices will inevitably affect consumers and businesses, with the extent depending on contract terms. “You’ll notice it sooner or later, depending on your agreement,” Van den Beukel said. Energy-intensive industries in Europe, in particular, will feel the effects, as gas remains a key component in electricity pricing.
Looking ahead, both Guth and Van den Beukel believe that affordability pressures will ease in the coming years, thanks to substantial investments by LNG-producing countries like the U.S. Increased production capacity is expected to stabilize global supply levels and moderate prices. “The market will continue to function as it always does,” Guth concluded.
Source:NOS
