Market areas which provide access to pipeline gas flows and at the same time have a strong LNG infrastructure offer a great opportunity for supply source diversification, depending on the pricing environment.
By starting 2020 with high pipeline imports under the LTAs, European market participants have significantly increased the share of spot LNG in their purchasing portfolios over Q2 and at the beginning of Q3. The shift occurred due to weak prices amid abundant LNG supply and lower demand arising from the spread of Covid-19.
This changed over the course of Q3, as the previous quarter’s low Brent prices started to play into the cost of the long-term pipeline deliveries. ‘Take-or-pay’ obligations also contributed to a considerable rise in contractual volume intakes, but ultimately it is the reduction in prices of gas under the LTAs with the simultaneous growth of spot LNG and European hub values that brought a change to consumer preferences.
This year’s price supervolatility has represented a powerful tool for cost optimization. In the context of gas market globalization, there is no question that more and more players will take advantage of choosing from among different sources of supply.
Source: Yakov Grabar
See original post by Yakov on LinkedIn.
