EU Gas Supply Ebbs with US LNG Cancellations: Marex

Europe's spot gas supply is coming down, thanks to the substantial slowdown of LNG imports, which has led to an unprecedented free fall in LNG send-out, according to research by Marex Spectron published July 2. It said regasified LNG sendout in week 27 was another 10% down on the week although Russian pipeline gas in the east has partially rebalanced the loss.

At one point, prices at the Dutch hub, the Title Transfer Facility – Europe's most liquid – were lower than US Henry Hub prices although they have since moved above, a state of affairs the trader expects to continue for the rest of summer. For the winter it expects a much closer correlation between Europe and the US, with LNG stepping in whenever the arbitrage opportunity widens sufficiently.

The result is, once again, a further drop in the storage surplus relative to 2019. Week 27 should end up with a positive margin of +5/6% (after being as high as +12% at the end of May). But should the current trend continue, the surplus could be virtually absorbed at some point between the end of July and first half of August, it said.

Demand is up as well, although the picture is not uniform across Europe. "The Business Expectation Index for some of the relevant segments has made the largest jump on record, with all sectors indicating a prompt pick-up in production. We have strong evidence that July will be the peak month (i.e. outperforming June) in production before a (brief?) slowdown during August," it said.