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Asia and South America Suck Up LNG Flows at Europe’s Expense

Asia and South America Suck Up LNG Flows at Europe’s Expense

Liquefied natural gas shipments to Asia and South America surged in July, with buyers willing to pay higher prices than European importers amid strong demand. 

Asian imports rose 16% in July from a year earlier and shipments to South and Central America nearly doubled to a record high, ship-tracking data compiled by Bloomberg show. European purchases fell to the least since January. Global LNG exports -- mainly from Australia, Qatar and the U.S. -- jumped 12%.

Asia and South America Suck Up LNG Flows at Europe’s Expense

LNG demand in Asia was mainly driven by hot weather in China, Japan and South Korea that increased air conditioning use, boosting consumption of the electricity feedstock. A drought in Brazil, meanwhile, slashed hydropower output, forcing utilities there to ramp up gas-fired power generation. U.S. exports of the super-chilled fuel more than tripled from last year as end-users maximized contract volumes.

European utilities have struggled to replenish inventories -- currently at the lowest level for this time of year in over a decade -- due in part to a drop in LNG flows to the region. And while that has sent the European spot benchmark soaring to a record, Asian importers continue to increase bids to secure supply.

To avoid a power crunch, Pakistan agreed to buy LNG at the highest levels since it started importing the fuel in 2015. Even price sensitive end-users in India and China recently snatched up summer shipments at the highest seasonal levels in eight years.

©2021 Bloomberg L.P.