- Persistent heat has increased the demand for LNG with Spain importing record levels to meet the high demand that has increased by 43%.
- Traders are betting on recovery by filling up LNG storage sites in the nation, which account for almost a third of Europe’s total capacity.
- Moreover, Shippers are continuing to buy gas despite their storage tanks brimming with LNG.
- Around 26 tankers are expected to unload in Spain this month to meet the excess demand with Russian tankers grabbing a 6% share of Spain’s total gas supply.
According to an article published in World Oil, Spain is importing near-record levels of liquefied natural gas due to high demand.
LNG storages full
The persistent heat has boosted cooling demand and depletes the amount of water available for hydropower generation.
With prices for the fuel near their lowest in three years, traders may also be betting on recovery by filling up LNG storage sites in the nation, which account for almost a third of Europe’s total capacity. Shippers are continuing to buy gas despite the tanks being almost full.
LNG inventories on a 5-year average high
It’s another example of how gas storage tanks are filling up across the continent to reach peak levels way before heating demand kicks in. That leaves a bigger-than-usual buffer for potential shocks in the winter, increases trading opportunities for when prices rise and raise questions about whether Europe can absorb all the gas that’s flowing in.
“Northwest Europe has had most of the gains in LNG deliveries this year owing to the ability to sell cargoes into highly liquid markets,” said Leyra Fernandez Diaz, a gas analyst at Energy Aspects Ltd. “But the physical options to absorb more gas in the power sector, turn down Algerian receipts and use more of the country’s spare LNG terminal capacity have allowed Spain to act as a considerable LNG sink as well.”
Increased demand for Spanish gas
Spanish gas demand increased 43% in the first 19 days of this month, compared with the same period of last year. That’s in part due to above-normal temperatures this summer and hydropower reserves about 17% below their 10-year median.
Lower spot LNG prices allowed Spain to boost gas power use, contributing to a considerable coal-to-gas switch, Fernandez Diaz said. Spanish buyers were also able to reduce Algerian pipeline supply, which is linked to oil prices and is more expensive, she said.
To meet higher demand, 26 tankers are expected to unload in Spain this month, up from 16 in August last year and a record 30 in July. A lot of the increase was due to more tankers from Russia, which has now grabbed a 6% share of Spain’s total gas supply.
Increase in long-term contracts as well
While Naturgy Energy Group SA has a long-term contract with the Yamal LNG project in the Russian Arctic that started last year, the country last month imported at least 3 more cargoes on a spot basis, according to Fauziah Marzuki, an LNG analyst at BloombergNEF.
That trend seems to be continuing with some of Yamal’s ice-class tankers, which are more expensive to operate than standard vessels, traveling more than two weeks to Sagunto, eastern Spain, data compiled by Bloomberg show. As of Tuesday, two cargoes with Yamal gas were en route to Spain, one on an ice-breaking ship and the other reloaded in Zeebrugge, Belgium.
Spain “has considerable LNG storage capacity and has been able to use this to absorb more LNG as prices have softened into the summer,” Fernandez Diaz said. “Reforms in place this year for using Spanish LNG infrastructure may also be encouraging firms to store more LNG at the terminals.”
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Source: WorldOil
