US natural gas a lifeline for Europe after Russian supplies stop

Increased production of liquefied natural gas in the United States is expected to help ease the summer competition between Europe and Asia for LNG shipments.

Russian natural gas exports via pipelines passing through Ukraine to Europe stopped on the first day of this year, after the expiration of the transit agreement and the failure of Moscow and Kiev to reach an agreement to continue the flows, so the closure of the oldest route for Russian gas to Europe ends a decade that witnessed tension in relations due to Russia’s seizure of Crimea in 2014, according to “CNN”.

Russia shipped about 15 billion cubic meters of gas via Ukraine in 2023, down from 65 billion cubic meters when the last contract began in 2020 for five years.

Rising U.S. LNG production is likely to help ease potential competition for LNG shipments between Europe and Asia, said Commodity Insights analysts, with “the pace of European inventory drawdowns expected to leave levels near 40% or lower in the spring after weaker-than-expected generation from renewables, such as wind, earlier this winter.” Lower inventory levels in Europe mean greater competition for LNG shipments between Asia and Europe as European participants look to fill storage ahead of a September deadline, the analysts added. “The loss of Russian gas to Europe means an additional 12-15 cargoes per month, although summer shipping requirements will depend on the level of inventory at the end of March.” According to Commodity Insights data, the current spread between JKM derivatives (a benchmark for evaluating spot LNG prices) for summer 2025 and winter 2025 contracts was near 19.2 cents per million British thermal units on Jan. 16 versus 45 cents per million British thermal units on Jan. 8.