Hot weather in Asia to lead to reduction in LNG supplies to Europe — Goldman Sachs

Hotter-than-usual weather in Northeast Asia has driven up the region's purchases of liquefied natural gas (LNG). Meanwhile, increased competition for the fuel could lead to a decline in European imports, according to Goldman Sachs analysts.

The bank said that the LNG price difference between Asia and Europe has gradually risen from $0.40–0.80 last month to a range of $0.60–1.00 per million British thermal units. The widening spread is mainly due to the hot weather in Northeast Asia. These conditions have led to an increase in gas imports to Japan on an annualized basis for the first time since January and have contributed to increased purchases in South Korea.

LNG imports to China remain low compared to last year. However, the gap with last year's levels is narrowing, indicating a gradual recovery in demand, according to Goldman. The bank's analysts added that this recovery is still slower than expected.

Stronger demand in Northeast Asia could lead to a decline in LNG imports to Europe. Nevertheless, the region will have sufficient fuel to reach 80% storage capacity by the end of summer, Goldman believes.