Gas prices in Europe have surged more than sixfold this year as Russia curbed supplies just as pandemic-hit economies reopened, boosting demand. Delayed maintenance work and power-plant outages also contributed to the rally. Prices in Europe are 13 times higher than in the U.S. and the market is also trading at a rare premium to Asia, making the continent a prime destination for LNG.
U.S. LNG export terminals are operating at or above capacity after reaching record flows on Sunday. That will help plug Europe’s gas shortage as Russia has already signaled it intends to keep supplies capped in January.
LNG WRAP: Asia Prices Drop With Europe as U.S. Cargoes Turn Away
In the short term, Russian gas flows sent through Ukraine dropped, while shipments into Germany via a key transit route remain halted for a third day. The Yamal-Europe pipeline is instead shipping fuel in the reverse direction, eastward from Germany to Poland, according to data from operator Gascade.
Russia’s supplies to Europe fell sharply this week as some buyers under long-term deals have already hit their contracted supply limits for the year, according to people with direct knowledge of the matter. Fuel shipments declined because European buyers cut requests, Russian President Vladimir Putin said Thursday.
More U.S. LNG will also help ease France’s power crunch, as countries will need to produce more electricity from gas, coal and even oil to cope with nuclear outages. At the start of January, about 30% of France’s nuclear reactor capacity will be offline.