Asia's LNG demand ticks higher, but Europe's slips, leaving prices muted

(Reuters) - Asia's demand for liquefied natural gas (LNG) ticked up to the most in six months in July but the small increase was partially offset by declining demand in Europe.

Asia's imports of the super-chilled fuel were estimated at 21.85 million metric tons in July by commodity analysts Kpler, up from June's 21.28 million and the most since January.

Europe's imports were estimated at 8.72 million metric tons in July, down from June's 9.06 million and lowest monthly total since August last year.

The Kpler data point to an increase of just 570,000 metric tons in Asia's imports in July, while Europe saw a drop of 340,000.

The modest shift in volumes in the top two LNG importing regions isn't enough to exert much influence on spot prices, as can be seen by the relative stability in Asian price.

Spot LNG for delivery to north Asia increased slightly in the week to July 28, ending at $11.00 per million British thermal units (mmBtu), up from $10.80 the week before.

The spot price has shifted slightly higher in recent weeks, after hitting a 26-month low of $9.00 per mmBtu in the week to June 9.

However, the spot price is still 84% below its all-time high of $70.50 per mmBtu, hit in August last year as Europe ramped up demand as supplies of Russia's pipeline natural gas dwindled amid the fallout from its invasion of Ukraine in February 2022.

What the import and price data show is that there is little uptick in either despite the northern summer usually being a period of elevated demand, especially when the weather is hotter-than-usual, as has been the case recently in both Europe and Asia.

Among Asia's major importers, China's demand remains muted with Kpler estimating July arrivals at 5.88 million metric tons, down from 6.20 million in June.

Japan, which reclaimed the crown as the world's biggest LNG buyer from China last year, saw imports of 5.09 million metric tons in July, up slightly from 4.85 million in June, but well below the 6.71 million in July last year.

South Korea, the world's third-biggest LNG buyer, saw July imports of 2.81 million metric tons, a small decline from June's 2.92 million.

India, which is viewed as a price-sensitive buyer, saw imports of 1.84 million metric tons in July, up a touch from June's 1.77 million and in line with the 1.88 million from July last year.

U.S. shipments

Looking at Asia's suppliers, and part of the reason for the relatively small movements in the spot price is the downward pressure being exerted by rising shipments of U.S. LNG.

The United States is seen as a swing supplier of LNG and had seen volumes shift to Europe from Asia as the former ramped up imports in the wake of the conflict in Ukraine.

Now that process is partially reversing, with Asia's imports from the United States hitting an 18-month high in July, with Kpler recording arrivals of 2.34 million metric tons, up from 1.43 million in June and 1.91 million in July last year

Europe's imports from the United States dropped to 3.45 million metric tons in July, down from 3.88 million in June and the weakest since August last year.

Europe's U.S. imports are also down 38% from the all-time high of 5.52 million metric tons in April, and July marked a third consecutive month of declines.

The opinions expressed here are those of the author, a columnist for Reuters.

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