Limited global LNG supplies could be “really, really tight this winter,” Cheniere Energy’s executive vice president for global trading told Reuters on Thursday.
Cheniere, the largest LNG exporter to the United States, believes current prices indicate LNG will continue to make its way to Europe, which has purchased 70% of Cheniere’s total production so far this year. and not too cheap.
“At the current price, the market is saying it should keep going in Europe,” Corey Grindal said in an interview at the Gastech conference on Thursday.
The United States has increased its LNG exports to Europe as the latter continues to face natural gas supply problems after Russia cut off the flow of gas through its Nord Stream pipeline and delayed the planned restart of Nord Stream 1.
LNG prices hit record highs last month as Russia restricted the flow of natural gas to Europe, causing a divergence between the spot price of LNG and the cost of LNG relative to oil – and countries that depend on the spot market find themselves unable to pay these prices.
Cheniere has already sold around 90% of its LNG production this year via long-term contracts.
“Ultimately what will decide the tightness of the market is how cold it gets and how government policies work, industry rationing… There’s still a lot of play to be played” , Grindal said. And weather conditions this winter in Europe’s LNG buyer rival, China, could determine how tight the global market will be and, incidentally, how much LNG Europe has left to snag.
China has already entered into several long-term LNG agreements with Cheniere – the most recent an agreement between Cheniere and PetroChina to supply 1.8 mtpy until 2050 – the longest supply agreement Cheniere has yet concluded.
By Julianne Geiger for Oilprice.com
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