The cost of LNG orders placed in recent days has fallen 10 to 40 percent below levels at the Dutch TTF exchange, driven lower by fine weather around Europe and subdued demand in Asia as a result of lockdown restrictions imposed over the past two months by authorities in China, insisting on a zero-Covid policy.
LNG price levels are also lower at the TTF exchange, easing to levels between 93.5 and 94 euros per MWh, the lowest since February.
Market pressure has also eased as a decision by Ukraine to disrupt a pipeline supplying Russian gas to Europe has had less negative impact than initially feared.
Ukraine’s decision, believed to have been taken to pressure the West for stricter sanctions against Russia, prompted Russia’s Gazprom to find a bypass solution through alternative routes to the EU.
These developments could lead to a significant reduction in wholesale electricity prices as a result of less price pressure faced by electricity producers.
The duration of China’s lockdown will greatly shape LNG market developments. For the time being, LNG orders that had been intended for China are being redirected to Europe.
Though supply to Asia has fallen considerably from high levels recorded just months ago, LNG demand typically increases in China, Japan and South Korea during summer.