West, East Med LNG markets compete for cargo volumes amid heat waves

East Mediterranean LNG prices hit a near two-month high July 25 compared with those seen in the West Med as heat waves across both regions pushed buyers to bid higher, pulling cargoes away from Northwest Europe and Asia, sources said.

Platts, part of S&P Global Commodity Insights, assessed the East and West Med LNG markers for September at $10.429/MMBtu and at $10.294/MMBtu, respectively, on July 25.

The 13.5 cents/MMBtu spread between the basins was the widest seen since the 16 cents/MMBtu on June 7.

Both basins were pricing at premiums over the Dutch TTF gas hub to pull cargoes away from Northwest Europe.

Platts assessed the West Med marker at parity to NWE on July 25, up from the 3 cents/MMBtu discount the day before. The East Med was assessed at a 13.5 cents/MMBtu premium over NWE, up from the 10.5 cents/MMBtu premium, according to data from Commodity Insights.

Mediterranean imports increase

Imports into the Mediterranean region totaled 2.28 MMt for July so far, up 0.26 MMt or 13% compared to the same period last year, Commodity Insights data showed.

The highest increase came from Spain that saw imports rise 54% on the year as it imported 1.65 MMt in July, the highest level across Europe.

East Mediterranean imports have risen 31% on the year across July 1-26 with Turkey seeing imports more than double year on year to 0.62 MMt from 0.27 MMt, according to Commodity Insights data.

Ongoing heat waves in the West Med -- Spain, Portugal and the South of France -- as well as some net withdrawals in Portugal, were pushing buyers to bid up.

Gas inventories in Spain and France were standing strong at 75.68% and 97.8% full, respectively, according to the latest data from Aggregated Gas Storage Inventory.

Although Portugal has also seen healthy levels, at 96.86% full, storages have fallen 4.47% on the week.

Sellers with the shipping flexibility were taking volumes to the Med where demand was stronger as Northwest Europe remained depressed.

"Demand is always there [in Europe but] cargoes not always there," an Atlantic-based trader said. "Europe is not ready to fight for the cargoes vs. Asia -- India, Egypt," the trader added.

LNG-gas spreads widen

The heat waves in the West Med were sparking the stronger prices, even pushing Mediterranean LNG-gas spreads to the widest levels across Europe.

The West Med was still pricing at premiums over the domestic gas hub PVB -- the Spanish gas price -- while NWE was still discounted vs. TTF and East Med still discounted vs. the Italian PSV gas hub price, according to Commodity Insights data.

The higher outright prices and lower regasification fees have allowed Spain and France to attract more waterborne cargoes.

"Make sense because nobody is buying in NWE and there is a demand in Med," a trader said regarding the higher prices in the West Med.

"But why Med is struggling to compete with Asia considering a narrow arb?"

However, favorable arbitrage economics could also be leading to stronger reexports from the region to Asia. The need to replenish domestic demand and favorable reexport volumes could together be pressuring prices, sources said.

Although the East Med is still pricing at premiums to TTF, traders were seeing LNG demand in the region lagging due to access to cheap pipeline volumes.

"The market has had variations, especially the Greek market has had poor liquidity," a trader said. "As long as LNG is pricing at a premium, gas will be the dominant supply choice."

"Greece has the Russian gas and volumes through the TurkStream pipeline," the trader added, referring to these supply chains being the predominant volumes fulfilling the current demand over expensive LNG.