Europe Dominates LNG Imports as Freight Costs Crush Asian Buyers

High freight costs have led to a shift in liquefied natural gas (LNG) shipments from the US Gulf Coast, with more supplies now heading to Europe. This redirection is due to the closed arbitrage between the US Gulf Coast and Asia, making it economically unviable for Asian buyers to import LNG at current prices.

The Atlantic-Pacific arbitrage is currently closed for the rest of this year, resulting in a 4% decline in LNG deliveries to Europe compared to last year. In contrast, LNG deliveries to Asia have declined by 30% over the past month, according to vessel-tracking data from Bloomberg.

The choked LNG flows from the Middle East have led to soaring gas prices in both Asia and Europe, with prices hitting a record high earlier this month. The current supply dynamics are causing concern about winter gas security in Europe, where storage sites were only 70% full as of September 27, well below the five-year average.