East Med LNG prices weaken against Europe on demand dearth, shipping length

East Mediterranean LNG prices have sunk lower against European gas and LNG weak demand in the prompt coupled with weaker shipping market helped to dampen premiums, sources said.

Platts, part of S&P Global Commodity Insights, assessed the DES East Mediterranean marker for December at $13.728/MMBtu on Oct. 25, up 38.2 cents/MMBtu.

This was a 13 cents/MMBtu discount against the Dutch TTF gas hub, which was the weakest differential seen since the 15 cents/MMBtu discount on March 15.

East Med prices have averaged around a 1.8 cents/MMBtu discount in winter so far, compared to the 4 cents/MMBtu premium for all of summer.

At the same time, East Med LNG was at a 15 cents/MMBtu premium against Northwest European LNG. This was hovering around the weakest levels seen since end of July.

Weakness in prices comes at a time where healthy underground storages and relatively cheaper pipeline gas flows have depressed demand for the super-chilled cargo fuel.

LNG imports into the East Mediterranean, including Turkey, Greece, Croatia and Italy -- Adriatic and Ravenna -- stood at 1.021 million mt, or 14 cargoes, according to Commodity Insights data as of Oct. 28.

This compared to the one million mt, or 13 cargoes, in September and 1.18 million mt, or 17 cargoes, in October 2023, over the same period.

At the same time, gas inventories in Italy and Croatia stood comfortably at 98.16% and 91.10% full, respectively, according to the latest Aggregated Gas Storage Inventory data. This compared the 98.53% full for Italy and 96.71% full for Croatia this time last year, the data showed.

Another trader added: “East med it is a super difficult market, pipe-gas volumes are so cheap it doesn't make sense for them to buy LNG.”

Healthy access to pipe-gas flows coupled with current temperate have depressed the appetite for the waterborne cargo market in the East Med.

Also weighing on prices was current cheap LNG freight rates. Some players with the additional shipping length have been offering cargoes into the East Med at discounts for December, which has helped alleviate premiums.

Similarly, prices at the Italian PSV natural gas hub have also eroded relative to other influential European hubs. Platts assessed the PSV month-ahead at Eur43.875/MWh Oct. 25, leaving it a premium of 40.5 euro cent/MWh and just 7.5 euro cent/MWh to the Dutch TTF and Austrian CEGH month-ahead products, respectively.

While these month-ahead premiums have weakened steadily since the onset of winter, they remain elevated compared to values seen last year when the PSV had been assessed at a discount of 99.5 euro cent/MWh to the TTF and 71.5 euro cent/MWh to the CEGH on Oct. 25, 2023.

“It’s all about the weather, because if we look at storages in Italy the level is higher than last year same period,” an Italy-based trader said. “If the weather is colder than last year we will see some premium ... but on a daily basis, not monthly. We could see some more positive spreads only in case of weather anomalies (colder), or supply issues from North Africa, LNG and TAP.”

Winter outlook

Looking ahead, although milder temperatures have helped to keep East Med prices for December relatively weaker in winter so far, some traders still maintain their bullish outlook for Q4 2024 and into Q1 2025.

Given the lower Middle East and North African LNG flows in the East Med, with constraints at the Suez Canal and Egypt’s switch to a net-importer, some players expect East Med prices to remain strong this year to pull in necessary cargo volumes away from other demand hubs.

“The current landscape of the East Mediterranean LNG market (Turkey, Greece, Croatia, and Italy) reveals that a confluence of supply-demand, and geopolitical factors will notably influence future gas availability and pricing in Europe,” Elizabeth Kunle, gas market analyst at Commodity Insights, said. “The potential increase in LNG volumes diverted from Europe to Egypt, combined with the loss of UA transit gas, raises the risk of supply disruptions.”

Kunle added that Egypt’s switch to net-importer has a significant impact for winter given the global LNG market is already expected to remain tight this year due to delays in new liquefaction capacity.