Page 7 - EurOil Week 04 2022

EurOil COMMENTARY EurOil

Easing pressure arrived in the UK on January 18. The journey
The reported resales are welcome news for required a second transit through the Panama
Europe, which is trying to address a combination Canal and nearly $1mn in tolls, illustrating the
of high gas prices, low stockpiles and low pipe- profitability of selling gas to Europe on the spot
line gas deliveries from Russia. The Yamal-Eu- market currently and the fact that the continent
rope pipeline, which normally delivers gas to is drawing cargoes away from Asia.
Germany, has been flowing in reverse mode for Price differentials between Europe and Asia
a month, and Russia’s Gazprom confirmed ear- have narrowed since the Hellas Diana changed
lier this week that it had not booked any volumes course, but the lower cost of crossing the Atlan-
to be delivered to Europe via the pipeline next tic compared with the longer journey to Asia via
month. the Panama Canal means that Europe remains a
Meanwhile, the Nord Stream 2 pipeline from more attractive option for sellers of LNG.
Russia to Germany is ready to enter service, but
requires final approvals from Germany and the What next?
EU, which are not expected to be issued until at No news has emerged thus far about potential
least the second half of this year. The situation buyers for the cargoes being resold by CNOOC
is further complicated by mounting geopolitical and Sinopec. Indeed, the LNG industry tends to
tensions and rising fears over a potential Rus- treat a lot of commercial activity as confidential,
sian invasion of Ukraine. The US government and media reports tend to rely on traders and
is treating Nord Stream 2 as leverage in its talks other sources familiar with such activity. As a
with Moscow and has threatened that a Russian result, the buyers that emerge may not end up
invasion of Ukraine could result in the pipeline being disclosed, at least until vessel-tracking
not being able to enter service at all. data show LNGCs travelling between China and
Against this backdrop, LNG imports to Europe.
Europe have been on the rise recently. Media In the meantime, Citigroup has projected
reported a “flotilla” of LNG carriers from the US that gas prices have liked peaked for this winter
arriving in Europe earlier this month, helping to in both Europe and Asia. And Rystad has noted
ease some of the upward pressure on European near-term weather forecasts for Europe point
gas prices. Indeed, European prices are so high to above-average temperatures, which would
that the Hellas Diana LNG tanker is reported to dampen the demand outlook for gas for heating.
have u-turned in the Pacific Ocean on December As of January 20, benchmark gas futures were
20 while travelling from Cheniere Energy’s Cor- reported to have fallen 8.9%, tracking weaker
pus Christi LNG terminal on the US Gulf Coast prices in Asia. If European buyers now start pur-
to Asia and headed for the UK instead. chasing Chinese LNG cargoes, this could help
Vessel-tracking data show that the ship spur a further decline in gas prices. ™

Week 04 27•January•2022 www. NEWSBASE .com P7