Croatia becomes a premium LNG hub because of East Med heatwaves

Heatwaves across the East Mediterranean and domestic storage requirements have resulted in Croatia becoming a "premium hub" in Europe for LNG cargoes, trade sources said.

Croatia's LNG imports have been relatively stable even the rest of Europe sees inflows at multiyear lows. Croatia's LNG imports of 206,000 metric tons in July were the highest for the month since 2021.

"Considering the shipping, Croatia is the premium hub right now [versus Northwest Europe]," an LNG trader said. "European storages are at a good level nearly 90%, [and] in the Mediterranean, most are between 75% and 90%."

Since 2022, LNG imports have exceeded domestic demand in Croatia. The Russia-Ukraine conflict that started in February 2022 has boosted the country's efforts to serve as a key source of gas in the region, Commodity Insights analysts said.

"Croatia intends to expand its role as a regional LNG hub in the coming years. It aims to use increased regasification capacity and pipeline developments to ramp up its gas exports to neighboring countries, such as Hungary and Slovenia," analysts at Commodity Insights said.

Platts, part of S&P Global Commodity Insights, assessed the East Mediterranean marker for September at $12.832/MMBtu on Aug. 16, a 27.5 cents/MMBtu premium to Northwest Europe and a 23.5 cents/MMBtu premium to the West Mediterranean.

The premium to the Northwest Europe price was hovering around the strongest level seen since March 20, while the premium to the West Mediterranean was the highest since April 22.

The East Mediterranean region, including Croatia, is facing an increased supply risk for winter due to the Russia-Ukraine transit deal nearing its expiry.

An escalation in the conflict between Russia and Ukraine recently near the Sudzha interconnection point has raised the possibility of Russian flows to Ukraine ending earlier than anticipated.

Currently, nominations through the interconnection point are about 40 million cu m/d. The sudden absence of these volumes could put pressure on East Mediterranean nations to secure gas supply for Southeast European nations.

"Fundamentally it is not bullish besides the Russian transit. I don't see anyone in Asia buying at these prices, and when you try to offer in Europe, no one is buying because it does not cover the regasification costs," another LNG trader said. "The Mediterranean, Mukran and Croatia are premium hubs versus Northwest Europe."

Slower demand has been plaguing the Northwest European market in the wake of high gas inventories and healthy US LNG supplies. Sellers with shipping flexibility in Europe have been taking their cargoes to the West and East Mediterranean where premiums are stronger.