The world is gearing up for a struggle for natural gas supplies this year, prolonging the pain of higher bills for consumers and factories in Europe and putting poorer developing countries from Asia to South America at risk of being squeezed out of the market, Bloomberg reports, writes UNN.
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For the first time since the energy crisis was exacerbated by Russia's war against Ukraine, Europe is at risk of failing to meet its storage targets for next winter, according to the publication, setting the stage for a final scramble for supplies before new liquefied natural gas capacity begins to ease next year.
While Europe has enough gas reserves to survive this winter and prices have fallen since the beginning of the year, supplies are dwindling due to the cold weather that swept across the continent this weekend. Supply options have been limited since earlier this year, when deliveries via Russian pipelines through Ukraine stopped after a transit agreement ended, the publication said.
"There will definitely be an energy shortage in Europe this year," said Francisco Blanch, a commodities strategist at Bank of America Corp. - That means all the additional LNG that will come on stream around the world this year will go to offset that shortfall in Russian gas.
To meet its projected demand, Europe will need to import up to 10 million tons of LNG a year - about 10% more than in 2024, according to Sol Kavonik, an energy analyst at MST Marquee in Sydney. New export projects in North America, as indicated, could help ease market tensions, but that depends on how quickly facilities can ramp up production.
With fewer options for replenishment by next winter, Europe will reportedly need LNG supplies, diverting some from Asia, where the world's largest consumers are located. Depending on how demand shapes up, competition will push prices higher than countries such as India, Bangladesh and Egypt can afford and affect Germany's economic recovery, the publication said.
European gas futures, which typically also influence spot LNG prices in Asia, are still about 45% higher than the same period last year, with contracts trading at about three times pre-crisis levels in 2025.
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The surge in prices "will be exacerbated if inventories in the Asia-Pacific region are also depleted, leading to competition for cargo," said Jason Feer, global head of business intelligence at energy brokerage Poten & Partners Inc. in Houston.
Those who will lose out because of Europe's ability to pay a higher premium for gas will be developing countries in Asia, some of whose cargoes are already being diverted to take advantage of the higher rates, the publication said.
For LNG sellers, who are already reaping the benefits of higher prices, this creates opportunities. In some cases, LNG producers could ramp up capacity similar to the export growth that occurred in the crisis year of 2022, according to Ogan Kose, managing director at consulting firm Accenture.
The outlook, it notes, depends largely on how quickly new production capacity comes online. There was little growth last year as Egypt halted exports and Russia's newest Arctic LNG 2 plant was "strangled" by U.S. sanctions, according to Laura Page of energy company Kpler, the publication says.
This, as indicated, puts the U.S. in the spotlight. "The world's largest LNG supplier has been advocating for years to save Europe from gas starvation, and that message is likely to grow louder once Donald Trump takes office. He has already threatened duties if Europe doesn't buy more US energy," the publication said.
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U.S. LNG exports are expected to rise about 15% this year, according to Kpler, as Plaquemines Venture Global LNG Inc. and Corpus Christi Cheniere Energy Inc. expand production. But the pace is in question. Cheniere has already warned that ramp-up this year will be "relatively slow.
In russia, still Europe's second-largest source of LNG, the focus will be on whether the country can maintain its exports after the U.S. on Friday imposed sanctions on two smaller facilities, the publication said.
"Trump's pledge to end Russia's war in Ukraine could also change the overall market outlook, especially if the peace deal includes energy as expected. Russian pipeline gas exports through Ukraine could eventually continue into 2025, according to a note by Anthony Yuen and other analysts at Citigroup Inc." the publication said.
At this point, Asia is noted to have enough reserves to cede LNG supplies to Europe. Chinese LNG importers were overselling shipments for delivery through March and have largely stopped buying on the spot market, where prices are high. Indian gas importers turned to cheaper alternatives, while Bangladesh was forced to adjust procurement tenders after bid prices were too high. Egypt turned to gasoil.
As noted, relief is just around the corner. From 2026, the delayed projects should finally start delivering fuel. At that point, tension in the markets may ease, according to Jefferies Financial Group Inc.
An additional 175 million tons of new supply will start arriving by 2030, mostly from the U.S. and Qatar. That could put downward pressure on prices and bring back customers in countries that are finding themselves in a tight spot this year, the publication said.
"If current plans to expand LNG supply continue, 2026 should be the light at the end of the tunnel," said Florence Schmit, European energy strategist at Rabobank.