European LNG delivered imports for Dec start strong at 1.39 mil mt

Delivered imports of LNG to Europe for December to date have kicked off at a robust 1.39 million mt, according to data from S&P Global Commodity Insights on Dec. 4.

Volumes this month are already starting at elevated levels after a strong month of imports in November of around 11.04 million mt, the highest since May.

Reported volumes for December are headed to the Netherlands (360,000 mt), Turkey (270,000 mt), the UK (200,000 mt), Germany (140,000 mt), Belgium (80,000 mt), Spain (70,000 mt), France (70,000 mt), Greece (70,000 mt), Italy (60,000 mt) and Portugal (60,000 mt).

The US is supplying nearly 70% of the total, while Russia is supplying around 11% and Algeria contributing 10%. Egypt was also noticeably providing 5% of the total volumes.

Bears outweigh bulls

The market has seen swings in sentiment as colder temperatures continue to keep the market in a state of anticipation as to whether heating demand will fully restart. Due to the back and forth between colder and milder temperatures, prices have been under pressure.

Platts, part of S&P Global Commodity Insights, assessed the DES Northwest Europe Marker for January at $12.981/MMBtu Dec. 1, up 52.10 cents/MMBtu on the day but down $1.442/MMBtu on the week.

Gas storage levels in the EU remain ample but fell 3.3 % week on week to land at 94.39% full as of Dec. 2, according to Aggregated Gas Storage Inventory data.

Although withdrawals have been picking up pace, storage remain strong and supply out of the US continues to flood the market. Additionally, demand in Europe and Asia has been fluctuating and providing little support for price falls.

Sanctions on Russian LNG

The US announced a new wave of sanctions on Russia in both September and November this year which aims to mitigate Russian LNG exports by sanctioning the development of liquefaction capacity, shipping, shareholding and trade.

"As with any sanctions, the actual impact will evolve over time as involved entities gain a clearer understanding of what activities are restricted, the sanctioning authorities clarify what they see as particularly offensive, and new workarounds inevitably evolve," Sara Pourghorbani, Senior Analyst, and Laurent Ruseckas, Executive Director, at S&P Global said. "However, with these new sanctions in place, it appears that NOVATEK's current expectations for all three trains of its new project, Arctic LNG-2, coming to fruition as planned are optimistic."

Sara and Laurent added that the first train of Arctic LNG-2 may well start production as expected by February 2024, but the new sanction appears to pose an additional significant challenge to its commercial operation.

These US sanctions directly target Russian LNG and will attempt to tighten Russia's future energy production, exports, and revenues.

Although Europe has still been taking in relatively large volumes of LNG from Russia, these latest waves of sanctions may make it increasingly difficult for Russian LNG volume to find a home in Europe.

The market is still optimistic around storage levels across Europe, suggesting that inventories should be well-enough supplied to last until the end of the winter season. However, if a cold snap were to ensue and Russian LNG was cut-off completely, prices could be subject to hikes in the coming months.